Esat shares leave others in the shade

Denis O'Brien and the other shareholders who offloaded shares in Esat's secondary offering late last month must be wondering if they got their pricing of that share issue a little awry, given the extraordinary performance of Esat's shares since then.

Those shares, including the 200,000 sold by the Esat chairman, were sold to new investors at $31 (£22.30) each, and no doubt the sellers were happy at the time to make a sizeable profit on their investment in what was essentially a start-up company. Remember, Esat was floated at just $13 a share a year ago.

Still, with Esat shares soaring the past week to over $42 on exceptionally heavy volumes four times the daily average some days Denis O'Brien must be wondering if he could have held out for more in the secondary offering. The $11 rise in the share price since that share offering means that he has missed out on a gain of $2.2 million on the shares he sold.

Certainly, the appetite for Esat shares on the US markets seems to be undiminished and the company has built up a sizeable following. But Irish institutional investors are cautious about a company that is still a long way from showing its first profit. Many cannot understand why the shares have more than trebled in little more than a year.

Is it a case of the US investor, as usual, willing to take a chance on a go-go new company or is it the innate conservatism of the Irish investment community at work? Remember, most Irish institutions with some honourable exceptions missed out totally on companies like Elan and CBT. Maybe it's time for the typical Irish fund manager to take the odd risk.

The early deregulation of the voice telephony market is one factor behind the recent heavy demand, while Telecom Eireann's own results show the sort of profit that might await Esat in the future. Time will tell who is calling it right.

And on the subject of Telecom Eireann, the flotation of the company next year has, not surprisingly, stimulated the broking community and its serried ranks of analysts into activity. ABN-AMRO was first into the fray this week with a detailed analysis of E Telecom which suggested a possible market capitalisation of up to £4 billion. Sounds a bit on the high side.

Davy Stockbrokers, which must also be fancying itself to pick up some of the lucrative flotation work from either Telecom or the Government, has also begun coverage. Expect the others to follow. The Telecom flotation will offer the Irish brokers and corporate financiers their biggest ever payday.