With less than 36 hours to go before the Medibank Private General Public Share Offer closes, investors yet to place a bid are running out of time – the official close time is 11.59 pm (AEDT) on 14 November.
It's certainly understandable that retail investors may have lost interest in this super-hyped initial public offering (IPO) given…
The structuring of the offer leaves a lot to be desired.
Firstly, there is an indicative share price range of $1.55 to $2 but retail investors have no idea of the final price that they will pay until after the fact! It's a bizarre situation – how often do you pay for something and then ask what it costs?
Secondly, the huge demand for this IPO makes it likely that the shares will be priced closer to $2 and also that a significant scale-back of bids will occur. This is a double whammy for investors – they are likely to end up paying a very full price for the stock and they may only end up with a small, inconsequential holding.
…but then there was The Stag!
A "stag profit" refers to an immediate profit being realised when an IPO'd stock lists at a premium to its float price.
The negatives highlighted above are also the "cause" of perhaps the one major positive. All signs are pointing towards Medibank Private's shares listing at a premium to the final price and thereby providing a "stag profit" for IPO investors.
This means investors stand to make an immediate windfall when the stock hits the ASX on 25 November. Of course while this is a pleasant situation, given the quality of the company, most investors will be viewing their shareholding as a long-term position in their portfolio. Given the long-term gains from owning other privatised government organisations such as Commonwealth Bank of Australia (ASX: CBA) and CSL Limited (ASX: CSL), a long-term holding period for Medibank Private shares could make sense too.
Thus, investors are more concerned with having their desired amount of stock allocated in the IPO than simply hoping for "the stag" as potentially they may never get the opportunity to purchase shares as cheaply in the aftermarket as they do in the IPO.
