Brokers bid in great numbers on behalf of their clients this week for shares in Medibank Private.
Australia's largest health insurer is being floated on the Australian Stock Exchange in a bid to raise between $4.3 billion and $5.5 billion for the government purse.
Experts suggested the number of interested parties buying shares in the health insurance company would be high, though brokers alone bid $11.987 billion in the first round of stock sales.
Despite the interest, brokers will be leaving with around one-eighth of the total amount of demand that has been submitted, with firms allocated only $1.5 billion in Medibank shares.
The nearly $12 billion demand from clients of brokers alone was more than double the estimated value of the total shares on offer, based on the retail price cap of $2 per share.
Working for clients
Brokers formed part of the retail offering, which will also consist of policyholder, employee and a general public offers during November. In this first round of sales, brokers worked on behalf of their clients in winning shares for distribution when Medibank becomes private in the coming months.
In a media statement, Finance Minister Mathias Cormann said the broker firm allocations were "appropriate and necessary" for ensuring equal access for other interested parties.
"All compliant brokers that applied for shares through the broker firm offer have been allocated shares. Those brokers are now responsible for allocating those shares to their clients," Mr Cormann explained on October 30.
"Consistent with the advice in the Medibank Private Share Offer Prospectus, the shares allocated to the broker firm offer may be subject to a further claw-back of up to 20 per cent, following completion of the institutional offer.
"Australian broker clients can of course still apply through the general public offer or, if eligible, the policyholder offer or employee offer, which remain open until 14 November 2014."
Greater health insurance competition
The finance minister continued to say the sale will remove the conflict of interest with the government being both the health insurance regulator and the leading provider, with more competition to be gained for health insurance customers.
Those thinking about changing their health insurance package or provider can find it a good time to compare health insurance prices.
The total price and share allocation of Medibank Private will be announced on November 25 after all offers have been finalised.