You are correct. The issue really was that the Underwriters were always going to get a shortfall from the retail component because it was so large. If it was a 1 for 10 I think it would have been easier but it really was 1 for every 2.8 So you had to increase your investment by 35%. That's a huge ask.
Having spoken to others at the time of the institutional process I was led to believe that the brokers had a large underwriting pool. They also told me that bids were being cut back. So the question that remains: did the brokers have sub-underwriters as they normally do where they know there will be a shortfall? In this case, they knew with 100% certainty that there would be a shortfall in the retail component.
That does not mean that those that took it up today are not going to keep them but it does create the risk that with markets wobbling they have room to discount the shares into the market and still break even or make a small profit.
So assuming the broker gave up 3% for sub-underwriters then they could drop the price to 70.5c and still break even.
I do think we will see weakness going into the next few weeks and until its all washed through. If it gets to 70c I think its a good buying point.
PGC Price at posting:
72.5¢ Sentiment: None Disclosure: Held
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