EDF’s 5m new private investors were disappointed yesterday as the French electricity group finished its first day of trading unchanged at the discounted retail offer price of €32 a share.
The uninspiring performance from the world’s biggest initial public offering in almost five years is also likely to disappoint institutions who paid €33 a share, and EDF management, which is hoping to be able to issue further shares to expand abroad and into the gas sector.
EDF raised €7bn ($8.2bn) from the capital increase to restore its balance sheet, while the government earned a further €1bn after selling shares to EDF employees.
But Analysts reiterated that the government’s initial valuation, encouraged by a record level of interest from private shareholders, had been too high at a market value of just under €60bn. “The price is relatively high for two reasons. First it is a real popular success and, second, the IPO of Gaz de France was well received,” said Julien Quistrebert of fund manager Richelieu Finance.
Institutional investors had been cautious, given the uncertainties surrounding future nuclear liabilities and doubts over the highly unionised group’s ability to extract cost savings from its 167,000 employees, he said.
“Is the group capable of restructuring? That is the key question. If the answer is yes, there is potential for a significant increase in the shares,” he said.
Few expected EDF to repeat the performance of GdF, which was floated in July and saw its shares jump more than 20 per cent on their first day of trading. On Monday, however, the market speculated that EDF shares were being supported by strong buying from banks behind the share sale. Analysts suggested that they shares were unlikely to move in the near future, with a greater risk that they could fall when any support diminishes.
Colette Neuville, head of ADAM, the French minority shareholders association, criticised the government for failing ordinary investors. “In order To please the government, banks were enticed to sell as many EDF shares as they could to their individual clients, rather than truly advising the investors on the price and the risks of such an investment.” she said.