UK election result gives food for thought on AIB share sale
Cantillon: Department of Finance needs to set the right price range to create momentum
AIB’s share sale would be the largest in Europe so far this year – a so-called jumbo IPO
The outcome of the UK general election, which has resulted in a hung parliament, left the Department of Finance with plenty to ponder in relation to its proposed AIB share sale.
The main issue is around pricing, with the department and its advisers deciding to push this back by at least a couple of days – to the end of next week at the earliest.
Setting the right price range is crucial to creating early momentum during the bookbuilding phase of an IPO. It is also key from a political viewpoint, given that it wants to achieve the best return for taxpayers on their €20.8 billion bailout.
The State plans to sell 25 per cent of AIB initially but will be looking to offload the remainder of its 99.9 per cent stake over time.
So it’s important to attract a high-quality, and supportive, shareholder register that won’t have significant churn.
When pricing the IPO, the department will want to attract the widest investor audience for the bookbuild while creating momentum that could allow it to demand a price close to the top of the range.
The difference between the bottom and top of the range can be anywhere from 20 to 25 per cent.
AIB’s share sale would be the largest in Europe so far this year – a so-called jumbo IPO. Market watchers say that, in the last two years, some 40 per cent of €1 billion-plus IPOs in Europe have priced in the top half of their price range, with the balance in the middle to bottom half.
Where AIB’s falls will depend on the political and markets backdrop, and the success of the bank’s senior management team in selling the investment case when they undertake their investor roadshows over the next couple of weeks. It’s game on.