The auction process for Fairfax Media's partial float of Trade Me was well supported, attracting just under $1 billion in bids for the $362 million of stock on offer, financial market sources said yesterday.
Fairfax said the share price had been set, through a book building process, at the top end of a $2.30 to $2.70 range, as reported earlier by APNZ.
The company said it had entered an underwriting agreement with UBS New Zealand for the initial public offer (IPO) after completion of the bookbuild, which was to institutional investors, NZX firms and brokers. Interest was strong from New Zealand and Australian institutions, it said.
The underwritten offer of 134.6 million shares, representing 34 per cent of Trade Me, will provide gross proceeds to Fairfax of $529.5 million, when combined with the new Trade Me's group debt of $166 million.
This was after Fairfax cancelled some of its own related party debt to Trade Me when it received a $220 million dividend this year.
Trade Me's prospectus is due out tomorrow. The share offer will close on December 7 and the company is expected to list on the NZX on December 13.
Some fund managers said the price had been set too high; others disagreed.
"A market is a market, and clearly they have told people that it was almost three times oversubscribed," said one fund manager. "With a billion dollars worth of bids, you can't say the pricing was right or wrong."
He said there had been global participation in the issue and that stocks such as Trade Me were better understood overseas.
Trade Me last year started launching "daily deals" on its homepage, offering products at a fixed price for a 24-hour period only, similar to the US deal-of-the-day website Groupon, which was launched in Chicago in 2008 and now serves more than 150 markets around the world.
Last week Groupon priced its IPO at US$20 a share, above the targeted range of US$16 to US$18, and increased the issue to 35 million shares from 30 million, Reuters reported.
The IPO was the largest from a US internet company since Google raised US$1.7 billion in 2004. Groupon saw its share price rise to US$31 in early trading on New York's Nasdaq exchange last Friday, 55 per cent above the IPO offer price. The shares later eased back to US$28.
Trade Me, which has 2.8 million members, was bought by Fairfax for $750 million in 2006. Upon listing, Trade Me will have a market capitalisation of about $1 billion, putting it in the same league as listed discount retail chain The Warehouse.
Fairfax Media intends to use the proceeds to reduce debt.
Shares in Fairfax last traded at A90c, down 3c, and have lost almost a third of their value this year.
- APNZBy Jamie Gray Email Jamie