The largest flotation in Australian history raced out of the blocks on Monday as shares in Telstra Corp Ltd, the nation’s biggest telecommunications company, rose 33% on the US $1.39 issue price during the first day’s trading. An estimated 1.2 million investors applied for shares in the company, including some 600,000 first time investors who were undeterred by recent fluctuations in world equity markets. A total of 4,288 million shares were issued, representing one third of the company’s share capital and raising around US $10bn in flotation proceeds for the Australian government. Overseas institutions were allocated about 800 million shares, leaving 81% of the former state-owned monopoly in Australian hands. While the instability of equity markets hasn’t dampened demand for the stock, it may well trigger an early sell off as investors incline towards taking the money and running. The Australian government has done its best to persuade small investors to hold onto their shares for at least one year by delaying half of the ten cent purchase discount (not available to institutions) until the second down payment in a year’s time, with no facility for early repayment. Telstra’s premium on flotation compares very favorably with the gaggle of recent international telecoms sell-offs. France Telecom SA, which debuted in October, saw a 13% premium on its first day while Telecom Italia, also out in October, initially rose 3% only to fall back to 5% below issue price. Investors in China Telecom have had a nail biting few weeks, having fallen victim to the turmoil in eastern markets. Their shares initially fell 18% below the issue price, only to recover to a premium of 13%.
