Demand for AIB shares from public well below early speculation

Small investors will pick up 10 per cent of AIB shares being sold by the State in the bank's initial public offering this week, as the level of demand from the general public has come well below what had originally been speculated.

That equates to about €300 million of shares, based in the mid-point of a range between €4.30 and €4.50 at which the shares are expected to price on Thursday evening ahead of the bank’s flotation on the main stock markets in Dublin and London. It would value the bank at just under €12 billion.

The new price range, issued on Wednesday evening by investment banks working on the deal, marks the second narrowing of the spread in as many days. The original range was set last week at between €3.90 and €4.90 per share, which would have valued the bank at up to €13.3 billion.

Investment bankers working on the deal said that they have secured orders throughout the latest price range to cover all the shares being sold.

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The State, which seized AIB in 2010 to prevent the bank from collapsing under the weight of spiralling bad loans, initially plans to sell a 25 per cent stake in the IPO. The investment banks have an option to acquire a further 3.8 per cent of the bank and place the stock on the market.

Final orders

While it had been reported soon after the Government announced plans last month to proceed with IPO that retail investors may apply for up to €900 million of shares, sources said that the final orders level from this category was about €400 million. An allocation of €300 million means small investors will receive, on average, 75 per cent of the shares for which they applied.

One source close to the process said that the final figure reflected the fact that would-be investors had to commit a minimum €10,000 to participate in the transaction.

While the order book for small investors closed on Wednesday, larger investors have until noon on Thursday to submit their offers.

Institutional investors, including pension funds and asset managers, can set the maximum price within the range that they would be willing to buy AIB stock. However, smaller investors had to commit to buying shares at the final price of the IPO that will be set by the Government and its advisers.