existing shareholders only

Stephen Bartholomeusz
August 31, 2006

It is probable the shares will be offered to existing shareholders only, through an entitlement issue.

There will almost certainly be discounts to the price set by the institutions for retail investors and perhaps a loyalty bonus — a further small discount for shareholders who hold the instalment receipts through to the final payment.

But the Government and its advisers have made it clear to the institutions and, indeed, retail investors, that it is likely the sale will be done entirely through an entitlement offer. They will have to be on the register to be entitled to participate. They have also indicated that institutions will be punished, by being excluded from the sale, if they sell their existing shares before T3.

The relatively small size of the sale — if the volume of shares offered is increased in response to demand it won't be by much — its features and the threatened sanctions have already reduced the incentives to sell or to remain underweight and, by distancing T3 from the hedge funds, forced them to cover their short positions.

That is why Telstra shares have been stable, indeed have firmed, despite quite solid volumes of shares being traded.