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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 them.
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 to sell.
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.