Mighty River offer
What’s in it for you?
The long- awaited Mighty River Power prospectus is finally available. The 256- page document should contain enough information for everyone, from those wanting just a brief overview of the risks associated with investing in the company to analysts who want detailed financial information.
The offer opens on Monday, April 15 and all New Zealand applications are guaranteed a minimum of $ 2000 worth of shares although they can apply for a minimum $ 1000 amount of shares.
A New Zealand applicant is an individual, company, trust or any other legal entity that is incorporated in the country and has a valid New Zealand IRD number, bank account and address.
The applicant must also confirm it is not acting for the account or benefit of a person in the United States.
Thus investors can apply for shares through any of the entities listed above as long as they meet the IRD, bank account and address criteria.
Every domestic application is guaranteed a minimum of $ 2000 worth of shares and if the issue is over subscribed, and applications have to be scaled back, investors who preregistered ‘‘ will receive an amount of shares which is 25 per cent higher than a New Zealand applicant who applied for the same amount of shares but did not pre- register’’.
One of the more important features of the issue is that retail applicants must apply for a dollar value of shares rather than a specific number of shares because the IPO price won’t be set until after the retail offer closes on May 3.
These applications can be made online, through an application form contained in the prospectus or by way of a broker firm offer.
The bookbuild is a process whereby institutions may bid for shares at specific prices either above, within or below the prospectus price range of $ 2.35 to $ 2.80 a share.
The Crown sets the IPO price after the completion of the bookbuild.
There is no assurance that participants in the institutional bookbuild will receive any shares or the number of shares they bid for. Institutional allocations will be influenced by factors ‘‘ such as whether the participant is a New Zealand institution managing significant investments on behalf of New Zealanders ( including KiwiSaver or superannuation) or a participant representing collective interests such as Maori trusts’’.
Retail applicants will be allocated shares by dividing the dollar value of shares applied for, subject to scaling, by the IPO price.
This process is a clear disadvantage to retail applications because they do not know the IPO price when they apply for, and pay for, their shares and the top indicative price of $ 2.80 a share is relatively expensive.
As far as Contact Energy’s 1999 IPO was concerned the IPO price was $ 3.10 a share, compared with the indicative range of $ 2.40 to $ 3, because of the overwhelming demand for shares.
The same could happen with Mighty River Power but retail investors cannot withdraw their application if the final price is higher than they want to pay.
Another important feature of the Mighty River Power issue is the loyalty bonus share scheme whereby all New Zealand applicants — individuals, companies and trusts — will receive one bonus share for every 25 shares issued under the IPO.
The bonus shares will only apply to shares continuously held from the IPO to May 14, 2015 and is limited to a maximum of 200 bonus shares.
These bonus shares will come from the Crown and will not be new shares issued by the company.