Retail demand for Fonterra units remains high with the price
of units trading at $7.15 yesterday, which was up from the
$5.50 listing price.
The market cap of the units was $525 million when they were
floated on November 30 but yesterday the cap was $669
million, an increase of $144 million.
Although trading among farmers (TAF) had been helping the
original demand for Fonterra units, the current demand is
driven totally by retail and institutional investors trying
to build a stake in the dairy co-operative.
The nearly 95 million units on offer have created a lack of
liquidity because of the severe scaling back of the
allocations. Many of those who have the units want to keep
If investors want to build a position, they have to push up
the price to make it attractive for investors to sell. The
demand for the units is not being driven by farmers wanting
The first disclosure of a substantial holding was released
this week. The Commonwealth Bank of Australia and its
subsidiaries notified the NZX it held a beneficial interest
of 7.43% in the units, or nearly 7.1 million units.
CBA, which owns ASB Bank in New Zealand, appeared to have
paid an average of $4.65 for its units.