KEY POINTS:
New Zealand retail investors made a small profit on yesterday's Telstra T3 share offer, but much less than their Australian counterparts.
Australasia's largest float since the Australian Government sold its A$16 billion in Telstra stock in 1999 debuted yesterday when T3 warrants began trading on the stock exchanges of both countries.
In New Zealand, investors paid A$2.10 - or $2.43 - for the first instalment, making a 2.5 per cent gain when the warrants closed at $2.49 on the NZX yesterday.
Australian retail investors paid only A$2, and made a 9 per cent gain when the warrants closed at A$2.18 on the ASX yesterday.
Warrants allow investors to buy Telstra shares in the T3 float with two instalments - A$2.10 now and A$1.60 in May 2008. The warrants pay the same dividend as a full Telstra share from the outset, giving them an annual dividend yield of around 14 per cent.
First NZ Capital head of research Barry Lindsay described the gains for New Zealand investors as very modest.
"But the fact that gains were obtained notwithstanding the increased size is a pretty satisfactory outcome."
The Australian Government almost doubled the share issue size to A$15.5 billion, nearly two-thirds of its stake, to meet strong demand from retail investors attracted by the strong yield.
But ABN Amro Craigs broker Bryon Burke said there had been little interest from New Zealand retail investors in T3 because they did not get the favourable treatment Australian investors did.
"New Zealand retail investors probably favour Telecom because of the recent decline in Telecom's price and as retail investors here didn't receive the discount," he said.
Greg Canavan, senior securities analyst at Australian fund manager Fat Prophet, said the increased share allocation had muted the performance of the T3 instalment receipts.
"I thought T3 would have listed at more of a premium to what they did. The increased allocation has had some effect on the after-market, but not anything too major."
Canavan said the increased allocation probably disadvantaged investors who were looking to make stag profits - when investors buy new shares expecting the price to rise - on the first day. He said the final price of A$3.60 would offer good capital growth potential.
The warrants
* Price to New Zealand investors: A$2.10.
* Next instalment due May 2008: A$1.60.
* Dividend yield: 14 per cent over 12 months.
* Shares issued: A$15.5 billion.
