Flying start for Carsales.com.au float

The partial float of Carsales.com is the first major test of investor appetite for new market entrants. Last financial year, companies raised more than $70 billion. The Carsales.com placement, completed over the weekend to institutional investors, was priced at $3.50 a share, which was slightly lower than some had expected.

Carsales.com's smaller shareholders a large proportion of whom are car dealers will now have the next two weeks to decide whether to sell their stakes into the public offer.

Its chairman, Wal Pisciotta, has sold at least part of his 16 per cent holding. But PBL Media, the largest shareholder of Carsales.com, is holding on to its 49.5 per cent stake in the country's biggest online car classifieds player, which it has called "a great asset".

The prospectus could be lodged today, while the company is likely to list on the sharemarket as early as next month.

The total number of shares to be issued in the Macquarie Capital-run float has yet to to be determined. At least 42 million shares, will be issued, but that number could rise to as many as 72 million, depending on existing shareholders' appetite to sell their stakes. It is believed the listing will value the company at $700 million to $800 million.

Despite the reception so far, some fund managers have taken a lukewarm approach to an offer they see as overpriced and a chance for vendors to cash in their chips rather than a raising to expand the business.

"I think it's quite richly priced compared with other ways of accessing online exposure," Hugh Giddy, of Cannae Capital Partners, said yesterday. "You can buy agencies like STW Communications and Photon, . . . for less than 10 times earnings."