The Government and its advisers are set for tense discussions on how to price Telecom Eireann shares, with the outcome crucial for the hundreds of thousands of investors who are expected to apply to purchase them.
The Department of Finance is expected to want a price of over £3 a share, but the Minister for Public Enterprise, Ms O'Rourke, and most of her Government colleagues are set to argue for a lower price to allow a bigger gain for investors.
Members of the public have until 4 p.m. next Wednesday to apply. However, they must apply for a cash amount and will not know the price at which the shares will be floated. This will not be announced until July 7th, the day before the shares are listed on the Dublin, London and New York stock exchanges.
The Government has announced that the price of the shares is likely to be set between £2.64 and £3.27. The middle of this range would be £2.95. Davy Stockbrokers has forecast that if the shares are set at this level, then the initial rise could leave gains of 10 to 12 per cent for investors in the short term. However, this will depend very much on the state of international stock markets when the shares list.
Ms O'Rourke and her officials are expected to argue for a price somewhere around this £2.95 level, but sources say that the Department of Finance wants to sell at a higher price, to maximise the gain to the Exchequer. Department officials are thus likely to argue for a price perhaps as high as £3.10.
No figures are yet available on how many people are applying for shares. A total of 1.2 million people registered to buy shares, but not all are expected to follow through. Banks, building societies and credit unions are reporting a high level of demand for loans from investors borrowing to buy shares, while many people are also withdrawing money from investment and savings accounts.
Major investing institutions are also believed to be responding positively to the Telecom share offer, and the Government and its advisers will hope to have a good indication of the level of interest by late next week. The final decision on pricing will be taken early the following week.
