The value of shares held by Telecom Eireann's army of 574,000 small investors is set to rise sharply today. Indications late yesterday were that Telecom shares will jump by 20 per cent or more when they begin trading on the Dublin, London and New York stock markets today.
The shares will float at £3.07 and financial institutions are understood to have already lodged bids at £3.70 or above, with indications late last night of some bids as high as £4. However, while the share may gain initially, it will be some days before it settles down to a firm trading level.
Market analysts said yesterday that while the price may jump to the £3.70 to £4.00 range initially, it may be difficult for the shares to maintain that level until late next week when private investors will be able to sell their shares.
Most small investors will not be able to realise their profits until late next week at the earliest when they receive their Telecom share certificates or nominee account statement. Trading between now and Wednesday will be on a "conditional" basis and will largely involve dealing between institutional investors.
The offer price for the shares was higher than expected at £3.07 (#3.90). This is between the lower level suggested by AIB Capital Markets and the higher level recommended by the other Government adviser, Merrill Lynch.
The Minister for Public Enterprise, Ms O'Rourke, would not accept that private investors will be disappointed that the shares are being sold at a higher price.
"I think it strikes a good balance. I hope small investors will see a good return; we wanted to give good value and have as many as possible participating."
However, the £3.07 pricing has been criticised by the Communications Workers' Union, which represents the bulk of Telecom workers. CWU general secretary Mr Con Scallan said he was concerned that the high price could damage the prospects of Telecom.
"We have argued that it is vital that a clear margin for growth in the share price be provided so that investors can be satisfied. However, I believe that the price set by the Government is too high."
He also questioned the wisdom of tying the fees paid to Merrill Lynch to the price achieved.
Of the one billion-plus shares being sold by the Government, 55 per cent are going to private investors and 45 per cent to financial institutions.
The public offering will raise £3.32 billion for the Government. Almost half of the 1.2 million people who registered for the priority allocation of shares went on to apply for them. Some 20 per cent of the adult population applied and of these some 60 per cent are estimated to be first-time share buyers. About 40,000 applications were made on behalf of children.
Some 41 per cent of the applicants applied for £1,000 worth of shares or less, with 47,000 to 48,000 applying for £250 worth.
Anyone who applied for up to £3,000 worth of shares on the priority application forms - available to those who pre-registered - will get the full amount. About 68 per cent of those who applied will get the amount they sought.
The remainder will see their allocations scaled back. Those who applied for the largest amount suffered the heaviest scaling back.
The average application was for £6,700 worth. Just 2 per cent of applicants looked for the top allocation of £100,000 and these investors will receive just £17,500 worth of shares.
One third of the shares allocated to institutions have been sold to Irish institutional investors. Just under one quarter of the institutional allocation has gone to the UK, 21 per cent to Europe and 20 per cent to the US.