The government will be keen to see Mighty River Power shares trade at a premium to its $2.50 issue price when it lists on the NZX at 12.30pm today, fund managers said.
The first day of share trading for any new listing is important, as it can illustrate the degree of optimism surrounding a share issue.
A small premium, up to around 5 per cent, would show that the Treasury and its advisers had got the issue price about right, fund managers said.
Anything over 10 per cent would suggest the shares had been under-priced, leaving the Government open to criticism for selling the 49 per cent stake too cheaply.
A drop below the issue price would tar the stock's reputation as an investment, and could have repercussions for the Government's partial privatisation programme.
Much is riding on Mighty River - not the biggest asset among the state's power generating portfolio but one of the most attractive - because the Government sees it as paving the way for the partial sales of the biggest generator and retailer, Meridian, and the diversified energy company, Genesis.
Matt Goodson, portfolio manager at BT Asset Management, said it looked like the issue had been priced accurately. If Mighty River Power closed with a 2 or 3 per cent premium, it would rate as a successful listing, he said.
Andrew Bascand, managing director at Harbour Asset Management, said the demand during the book-building phase was such that offshore institutions "could have bought all three potential gentailers in one swoop".
However, he said strong overseas demand would not automatically translate into a high share price on the stock's debut. Utilities are regarded as yield stocks, and a 5 per cent yield is seen as a benchmark.
At $2.50 the Mighty River shares would yield 5.2 per cent, but if the shares rallied the yield would potentially drop below that level and make it look less attractive, Bascand said.
Woodward Partners analyst Nick Lewis said unsatisfied demand would support the share price on its debut.
"In an IPO [initial public offer] you nearly always leave a little bit of room to create some upside in the stock and that's going to be the case here.
"[Prime Minister] John Key and [Finance Minister] Bill English would like to see the same group of investors come back in the next 12 months, so it has to go well," he said.
A disincentive for those retail investors wanting to take a quick profit is the Mighty River loyalty scheme, which means domestic investors will receive one loyalty bonus share for every 25 shares they hold for two years from the offer, up to a maximum of 200 bonus shares.
Local institutions, many of whom did not get as much stock as they wanted, were more likely to be buyers rather than sellers, Shane Solly, portfolio manager at Mint Asset Management, said.