Sharp Air NZ share price slump under scrutiny

TIM HUNTER
Last updated 05:00 01/12/2013

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The stock exchange is understood to be investigating the causes of a sharp drop in Air New Zealand shares in the immediate aftermath of the government sell down.

Several market players expressed dismay when Air NZ shares slumped from the offer price of $1.65 a share as soon as trading reopened following the sale of a 20 per cent stake by the Crown on November 18 and 19.

Although the stock had recovered the lost ground by Friday last week, there was concern the events could discourage investors from taking part in future transactions.

Data obtained by the Sunday Star-Times show that as the trading unfolded there was a substantial volume of sales through a range of brokers.

The opening trades on Wednesday, November 20, were small sales from broker Forsyth Barr at $1.63. As the day wore on, the broker handling the most selling volume was First NZ Capital with 6.5 million shares.

The second-biggest sales volume, 3.8 million shares, was handled by Craigs Investment Partners, one of the brokers managing the sale alongside Deutsche Bank and Goldman Sachs.

Over the first four days of trading, the most sales volume came from Craigs with 13 million shares sold, followed by First NZ with 11.7 million and Macquarie with 6.3 million.

One market source, referring to the bookbuild process in which brokers and institutions were invited to bid for the stock being sold, said: "They had full transparency on the book, and the look and feel and texture of that book." Another market source said brokers had been led to believe there was such strong demand that investors would be able to get only a fraction of the stock they wanted.

"You go out there and you rely on what you're told."

It is understood that the first indications of demand were communicated to brokers on the evening of the 19th.

The Star-Times has seen one email sent out to market participants and the Treasury from lead manager DeutscheCraigs at about 8pm that Monday.

It said "the total offer is more than fully covered by New Zealand demand alone through to NZ$1.65", and advised that "up to and including this price we expect material scaling across all investor pools".

Brokers were able to submit new or revised bids until noon on the Tuesday, by which time international bids would also have been received.

The process led to speculation that some brokers were left having to sell surplus stock after over-estimating the level of scaling applied to their bids.

Commenting on the level of sales from First NZ and Macquarie, one market source said: "My sense is those two stepped up and were slotted between the eyes."

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However, it is understood that some holding excess stock could have channelled their selling through other brokers, so the sales data does not necessarily identify overbidders.

The NZX, which regulates broker conduct through its Participant Rules, declined to comment.

- Sunday Star Times

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