The Government may cut back the number of shares it will sell in Aer Lingus because of fears over short-term speculation in Aer Lingus sharesby hedge funds.
A large number of US- and EU-based hedge funds - (which are largely unregulated and privately managed investment funds that use aggressive financial strategies) - have subscribed for shares in the airline.
Instead of accepting all offers from hedge funds, the Government now has the option to retain a higher-than-expected stake, which would reduce the shares available to these funds.
Its target is to reduce its holding from 85 per cent to 25 per cent, raising up to €293 million for the Exchequer.
The final decisions on both the price of the Aer Lingus shares and the number to be sold will be made later this evening, with the Department of Finance playing a key role.
The final price is likely to be struck close to €2.35 a share, although this is subject to change depending on late demand.
Today is the closing deadline for bids to be received from big investment funds, including hedge funds. Hedge funds are a concern because they may "stag" the flotation by selling shares for a quick profit as soon as market dealings commence.
If the Government retains a bigger stake than 25.1 per cent it can squeeze out the hedge funds.
Despite the concern over hedge funds, the banks advising on the initial public offering (IPO) are expecting more major institutions to come forward today.
A source close to the IPO said the level of hedge fund interest was not abnormal for this stage in the process.
The source said the co-ordinators of the offer were broadly happy with the quality of the list of investors, and believed that the Government could sell its whole Aer Lingus stake with a degree of comfort. However, the Government may prefer to sell fewer shares to ensure the flotation is not disrupted by hedge funds.