The price for the Government's Air New Zealand sell-down is likely to be set close to $1.65 - the price it last traded at on the sharemarket, according to sources close to the deal.
But there is division over whether the shares will be bought by many retail investors.
Bidding for the 20 per cent stake being sold by the Government opened at 9am yesterday morning with the floor set at $1.60 per share rising by 1c increments depending on demand.
Brokers were asked to give initial indications of demand by close of business yesterday with a second indication of demand due at lunchtime today.
The bookbuild process has been held over two days to allow brokers time to contact their retail clients to ask if they want to buy shares in the sell-down.
Typically block trades are sold at a discount to the last trading price but the level of demand from institutional investors is said to be driving the price up.
The Herald understands the $1.60 starting price has been well-covered by demand and some bids have come in as high as $1.67.
If the share price is set at $1.65 the sale would potentially raise $363 million for the Government before fees are taken into account.
But the Government must also balance demand against its promise to ensure a minimum 85 per cent of Air NZ will be owned by New Zealanders. It intends to keep 53 per cent.
Interest for Air New Zealand is said to be strong from international investors and local institutional investors.
But retail demand is unclear.
Grant Williamson, a director at Hamilton Hindin Greene, said he was seeing very limited demand from retail investors.
Williamson said many investors had been put off by the performance of the airline industry.
"It's an industry quite a few investors are not overly keen on. Air New Zealand may be an exception as it has a huge domestic market share which does insulate it against a lot of competition. It is very well managed - they have done well in the past but there are so many variables that could go wrong. It will only suit a limited number of retail investors."
Williamson said he expected demand to come mainly from institutional investors. "It gives them the opportunity to buy large chunks rather than buying on the market and it affecting the share price."
Martin Poulsen, head of wealth management at First NZ Capital, said it was too early to predict retail demand when spoken to yesterday afternoon. "It's a work in progress. Advisers are speaking to their clients. It's still early days."
Craigs Investment Partners, the broker whose investment banking arm has been appointed to help sell the shares, is understood to have had interest across the board from both high net worth clients and members of the public walking in. Brokers have been incentivised to sell to retail investors with a commission of 0.35 per cent. A lower commission is being paid for signing up institutions.
The final price is expected to be announced at the close of business today.
• New Zealanders will own at least 85 per cent at the point of sale
• No one investor can own more than 10 per cent
• Airlines or any other aviation business cannot buy any shares in Air New Zealand without getting approval from Kiwishare minister Gerry Brownlee