Nov. 30 (BusinessDesk) - Units in the Fonterra Shareholders' Fund jumped 21 percent on their debut as investors clamoured to get more exposure to the dairy cooperative's earnings after a $525 million initial public offer.
The fund, which grants holders access to Fonterra's dividends but not voting rights, opened at $6.66, after the issue price was set at $5.50 after a bookbuild, the top end of the indicative range. It recently traded at $6.70, with some 3.9 million units changing hands in the first few minutes of trading.
The units climbed on heavy volumes even as this story was being published.
Some 58 percent of the units were allocated to New Zealand retail and institutional investors and the class of investors known as Friends of Fonterra, which includes Australia’s Bonlac. The rest were sold to foreign institutions.
The change will substantially reduce the share redemption risk on Fonterra’s own books, which has billowed to more than $700 million in recent years, by giving farmers a venue to trade the shares among themselves.
No farmer shareholders used the new facilities to trade Fonterra stock among themselves.
While the fund attracted massive demand, the pricing was deemed too rich for research firm, Morningstar, which last week gave a 'do not subscribe' recommendation. Morningstar said investors would be better served waiting for the units to list and consider buying in if the price fell to $4.95.
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