'Bun fight' predicted over auction site shares

Trade Me is expected to become one of the top 10 listed companies on the New Zealand stock exchange after its former owner Fairfax sold its remaining 51 per cent stake in the company yesterday.

Institutional investors received notification of their share allocations late yesterday after a two-day bookbuild bidding process was undertaken by investment bank UBS.

One New Zealand fund manager who did not wish to be named said the offer appeared to have been heavily scaled due to high demand for the shares, while another described it as a "bun fight".

Earlier yesterday some New Zealand investment managers expressed concern that a high proportion of the stock might go overseas particularly to large Australian investors.

The source said it was not clear how consistent the scaling had been across all parties but Trade Me's inclusion in the ASX200 index appeared to have attracted the interest of a number of Australian managers.

Trade Me is expected to move up to 170 on the ASX and sixth place on the New Zealand stock exchange, forcing managers who track the indices to increase their stakes.

Any move into the NZX 10 index would not officially take place until March, when the NZX undertakes its next review.

The share selldown is expected to result in a number of substantial security holder notices where those who own more than 5 per cent have to declare themselves to the market.

Ellerston Capital, a fund manager controlled by rich-lister James Packer, emerged as a substantial shareholder of Trade Me in August, sparking speculation that the Packer family could make a bigger play for the online auction site.

But the Herald understands that a cornerstone investor is unlikely to emerge from the deal, leaving Trade Me's share register wide open.

Fund managers spoken to yesterday also believed the stake was unlikely to end up with a single major player in the online shopping space.

"I'm sure that this [stake] would have been shopped around among potential 'trade' buyers, and it's interesting that no one has really put up their hands," one fund manager said.

"If there were other trade buyers, one would have thought that this would have been an opportunity," he added.

"But who knows what might happen a year or two down the track."

There was also concern in the market over Trade Me's performance and growth potential. Trade Me's share price hit $4.45 in late October but has drifted downwards of late and it was trading at $4.05 on Friday before the bookbuild began.

"There are concerns that Trade Me's trading position may not be so great.

"People are starting to question whether the share price has run ahead of itself," one fund manager said.

But Trade Me chief executive Jon Macdonald said Trade Me was still on track to meet guidance given at its annual general meeting in October.

Macdonald said the change in ownership would not make any difference from an operational point of view as Trade Me had always operated independently from Fairfax.

"It's very much business as usual."

Shares in Trade Me were expected to resume trading this morning.

Fairfax's move means the company will exit Trade Me completely.

Shares in Fairfax closed up A0.5c at A51.5c yesterday. additional reporting Jamie Gray

- Tamsyn Parker of the New Zealand Herald