Exchange encouraging pools for new floats

Press, 9 May 1984, Page 33

Exchange encouraging pools for new floats

By

NEVIN TOPP

Although the allocation of shares in new issues has become more difficult because of high investor demand at present, the New Zealand Stock Exchange has tried to encourage the use of public pools by offering concessional brokerage rates. Of the 14 issues to take the market so far this year, 12 took advantage of the new concession, says the executive director of the exchange, Mr R. B. W. Gill. The calculation for the public pool of 25 per cent of the shares being offered to the public includes the organising brokers and underwriters’ allocations, but excludes the shares that the promoters of the company may have retained. At the moment the share allocation is seen as being in three stages. The promoter of the company retaining shares for their own use, such as for existing shareholders, directors, or families, a second stage is the allocation of shares by the organising brokers and underwriters, and the third

stage is the public pool. Although in only two of 14 instances was there no public pool for the new floats, in almost all instances it has been too many investors chasing too few shares. Equiticorp Holdings, Ltd, a new finance company, is such an example. Its chairman, Mr A. R. Hawkins, said that with about one week to go before issue opened and closed it was already “fairly fully subscribed.” The public pool for the 15M 40c ordinary shares consisted of 3,750,000, with a further 11,250,000 ordinary shares on allocation for the organising brokers and underwriters. Mr Hawkins suggested that the subscriptions to the public pool might have to be scaled down to the minimum rate on offer of 200 shares to be fair, leaving the company with at least 18,000 immediate shareholders. The size and the interest in the issue seems to have a big bearing on what will occur in the market place. In the case of Equiticorp it has been suggested that as

much as one-third of the 15M ordinary shares on offer will not go through brokers’ hands at all, and that many applicants found that they could not obtain these shares because their brokers’ allocations were small. Perry Dines Corporation and Fortuna Corporation (which was listed yesterday) were the two issues without a public pool. In both cases the shares were reserved for allocation by the organising broker, Jarden and Company, but both issues were small. Perry Dines had 4.5 million 25c shares at 100 c each on offer, including 400,000 to staff, and Fortuna 1.3 million 50c shares, including 100,000 to staff. However, Laurensons Bakery, Ltd, of Dunedin, offered a public pool of 112|500 50c shares at 100 c each out of a total issue of 950,000 shares. But the issue was seen to be of mainly local interest even though stock exchange listing is being sought. What has annoyed some investors has been a question of fairness in the way

that the shares have been allocated, although Mr Gill says that the Stock Exchange has not received any complaints from the public this year, but it did so over the oil floats last year. What seems to have occurred is that there has been a big upsurge in interest in the market in the last 12 months, which has led to increased investor awareness. Mr Gill says that in general, the quality of the new floats coming on to the market has been high, and of a wide variety. In general, the market has also been strong, and only in one or two instances has the “stag” failed to make an immediate profit from selling an allocation (Leisureland Corporation being one). The concession brokerage rates offered to those floats with public pools is seen as a means of ensuring a spread of shareholders (a certain number of shareholders is a requirement for listing). “The exchange would like to see public pools,” Mr Gill says.