The end price of the secondary public offering whereby the state will sell 9.84% in the country’s biggest oil company Petrom could be set at the end of the duration of the offering based on buy orders placed by investors, capital market sources say.
Unlike in the case of initial public offerings (IPOs) of Transelectrica (TEL.RO) and Transgaz (TGN.RO), where the price was a fixed one, Petrom’s offering could have a maximum price or a price interval (maximum and minimum price) approved by the Government.
Investors will thus be able to place orders to buy shares at various prices, within the set interval. The orders will be ranked from the highest to the lowest, and the end price will be that at which the offering is fully covered. This price-setting was also used in the initial public offering conducted by Google on NASDAQ in 2004. The offering conducted by Austrian group OMV, Petrom’s majority shareholder, at the end of May, followed a similar procedure.
The government commission coordinating the sale of the 9.84% stake in Petrom is due to make a final decision on how the offering will be conducted and on the price on Monday, which will be then discussed in Wednesday’s Government meeting, official sources say. The privatization commission consists of Economy Minister Ion Ariton, Finance Minister Gheorghe Ialomitianu, head of the Office of State Ownership and Privatization in Industry, or OPSPI, Karoly Borbely, secretary of state within the Economy Ministry and Andreea Paul Vass, adviser on economic matters to Prime Minister Emil Boc.
They are analyzing the proposals of the consortium that brokers the offering, led by Russia’s Renaissance Capital, and are seeking the best solution to obtain the biggest possible price, so that Prime Minister Emil Boc can keep his promise of getting a better deal than former Prime Minister Adrian Nastase did when he sold Petrom to the Austrian group in 2004.
The commission will also decide how the offering will be divided between retail investors and institutional investors. According to sources quoted by Mediafax, the small investors’ allotment will account for a maximum of 20%.
“The chunk allocated for institutional investors accounts for around 80%-90% of the offering; it has not been decided yet, and small investors will be allocated 10% to 20%. A maximum price will be announced, and then everyone will be able to subscribe as much as they want at whatever price they want,” said the quoted sources “The same method of allocation will be used for both chunks. Those who want the most shares and offer the highest price win, because it is important for the whole stake to be sold at the best possible price.”
Petrom’s offering is the biggest transaction in the history of the Bucharest Stock Exchange. At Friday’s price of RON0.3832 per share, the 9.84% stake the state wants to sell is worth around EUR504 million.