With the Medibank Private IPO priced at $2.15, the government has exceeded the indicative range of $1.55 to $2.00 disclosed in the prospectus. However, in a nod to voters, it has sensibly ensured that retail punters only pay $2.00, at least locking in a minimum 7% gain for them in the short-term. The share price could list higher than $2.30 when trading begins today at 12pm.
In summary, the government has achieved its aim of maximizing the sale price of the business. That it’s managed to do this while looking like its done shareholders a service means you can expect more government floats sold along similar lines soon.
The Queensland government intends to raise $33bn through the privatization of its electricity transmission networks along with the ports in Gladstone and Townsville, while the New South Wales government also intends to privatise its electricity poles and wires should it win the next state election in early 2015.
All in all, the privatisation pipeline exceeds $100bn so expect to see a lot more IPOs like Medibank Private in the near future, particularly as the Federal government is trying to encourage states to flog off assets via its $5bn ‘asset recycling’ program. This program provides a 15% bonus to states that use the proceeds from privatisations for new infrastructure investments.
While there will always be an incentive for governments to underprice assets to keep private investors who vote happy, let’s hope they follow the path created by the Medibank Private IPO and maximise proceeds for the benefit of all taxpayers.
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