French electric company EDF has disappointing market debut | VailDaily.com
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French electric company EDF has disappointing market debut

PARIS – French electric company Electricite de France SA failed to electrify the market after its flotation Monday, disappointing investors who had hoped for an instant return on the world’s biggest IPO this year.Shares in Europe’s second-largest power company closed at 32.00 euros ($37.37) – exactly the price paid by the record number of individual investors who subscribed to the 7 billion euro ($8.2 billion) issue – amid suggestions that the underwriting banks had intervened to prop up the stock.Institutional investors, who paid 33.00 euros ($38.54) per share, had criticized the government for setting both offer prices at the high end of their previously announced ranges.The ambitious pricing was seen as a response to accusations that the government had sold off other state assets too cheaply. Shares in natural gas distributor Gaz de France jumped more than 20 percent on their first day of trading in June.But the move could backfire politically if the 4.9 million people who bought EDF shares were to see their investments immediately eroded, financial daily La Tribune warned in an editorial.EDF now has more individual shareholders than any other French company, after a government-backed advertising drive that the newspaper described as “full of flattering information about the company but infinitely more discreet about its weak points.”Combined with the sale of another 1 billion euros ($1.2 billion) in existing government-held EDF shares to employees of the utility, the capital increase will dilute the state’s holding to 85 percent from its current 100 percent.Finance Minister Thierry Breton last week allocated 60 percent of the new shares to small investors and 40 percent to institutions, instead of the planned 50-50 split, as demand from individual investors outstripped institutional orders.Analysts cite EDF’s expensive, inflexible and highly unionized work force, significant debts and looming nuclear decommissioning liabilities as reasons for caution.”The era when the individual investor would jump on any privatization in the hope of an immediate gain is over,” said Laurence Boone, chief economist at Barclay’s Capital in Paris.But traders saw signs of massive intervention by the four underwriting banks, led by Credit Agricole subsidiary Calyon, to keep the legions of new EDF shareholders in the black.After opening at 32.29 euros ($37.71), the stock fell back, bouncing along the 32.00 euro ($37.37) line without even once dipping below it. A large volume of shares was traded – 53 million changed hands in under six hours – as some of the new stockholders sold their stock.Finance Ministry spokesman Benoit Gausseron declined to answer questions about price intervention by the banks.The 6 billion euros ($7 billion) that EDF has already raised in the issue, together with 1 billion euros ($1.2 billion) in potential proceeds from an additional allocation to the four banks, will help fund a promised 40 billion euro ($47 billion) drive to expand power generation and distribution capacity, mainly in France.


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