KEY POINTS:
The Federal Government is trying ever so hard not to break out but its A$8 billion sale of Telstra stock is gong so well it will almost certainly exceed A$10 billion.
In what has proved a late rush, small investors and existing Telstra shareholders have made a dash for T3 share allocations online and via Commonwealth Bank branches before the retail offer closed on Thursday afternoon, exceeding targets of A$3.5 billion from this investor segment.
The Government and its float advisers admit they are surprised - just last Sunday the chairman of T3's bankers, Terry Campbell of Goldman Sachs JBWere, said small investors seemed to be confused by the offer.
They may well still be but the punters have bought billions of T3 stock regardless.
"It was slow at first and you might have seen people like Terry Campbell making something of that," said Australian Finance Minister Nick Minchin on Thursday. "But it has clearly come with a rush and that is great news and we are delighted and pleased that is the case."
The success of the retail offer now puts some heat into pricing for next week's sale to institutions. The structure of the T3 offer allows the A$8 billion ($9.2 billion) target to increase to meet demand from existing institutional shareholders, which are guaranteed one-for-two entitlements in T3. It means the final figure is pretty sure to break the A$10 billion threshold and possibly touch A$12 billion if a minimum of half of Telstra shareholders take up their entitlements at the strike price set after bidding by institutions in a book-build from November 15 to 17.
Retail investors pay A$2 for their first T3 instalment, a 10c discount to the institutional price. The second instalment of shares is decided by the lower average trading price in the three days before the book build or the price set in the book build.
It was all these fancy twists and turns which had Campbell worried about confusion among the punters last weekend.
Despite the mud, the announcement 12 weeks ago by Prime Minister John Howard for an A$8 billion float has proven quite a fillip - fierce squabbling between Telstra's board and federal Government notwithstanding.
"We were always unsure how the retail offer would go," Minchin said this week. "We were optimistic but you never know ... "
And despite what must be an enormous temptation now for Howard and Minchin to throw even more stock at what appears to be a hungry market, it just won't happen. The reason? Simply, next year is election time and the last thing the Government wants is a whole bunch of small investors doing their money (again) on Telstra shares and having their revenge at the ballot box - this time last year 70 per cent of voters were opposed to another Telstra sell-off.
Minchin acknowledged as much. "The Government is not focused on maximising the size of the offer, in fact there are good reasons to prefer that a number of [institutional] investors will have to buy shares on the market rather than meeting their demand fully in T3," he said.
"That is because we are quite explicitly focused on having an orderly after-market in Telstra stock."
Indeed, by limiting the allocation of T3 stock to institutions, the Government could well ensure a shortage of shares and force bigger investors to buy on the open market.
This should see an increase in Telstra's share price, keeping T3 investors happy and, consequently, ensure one less potential drama for coalition election campaigning.
Paul McIntyre is a Sydney journalist.
