After the hype of the Medibank initial public offering, the company officially being listed on the Australian Securities Exchange (ASX) had the potential to be underwhelming, but investor interest has remained high.
Prior to the company going live on the exchange at midday on November 25, much had been made about its share prices, which were collectively valued at at $5.679 billion.
Whilst retail investors had their shares capped at $2, prices of some were driven as high as $2.15 which further implied that market capitalisation had boosted the value of the company closer to the $6 billion mark ($5.921 billion).
Biggest market float this year
In the biggest market float of the year – and one of the biggest in Australian history – the shares opened at an incredibly promising $2.22. That price is the most significant of its kind since the telecommunications conglomerate Telstra began public trading in 1997.
Minister for finance Mathias Cormann – who rang the bell which commenced trading – outlined why there are positives for both the wider public and Medibank private health insurance policy holders.
"It's a win for Medibank Private policy holders because we believe Medibank in private hands will perform even better than under government ownership because they will have more flexibility to pursue growth opportunities into the future. [Furthermore] it's a win for all Australians with private health insurance and indeed it's a win for all Australians seeking affordable access to high quality health care."
Long term interest
Despite the interest being at stratospheric levels at the moment, the real test for the share price will be whether it retains all of its value over the coming weeks and months. At the time of writing, the shares have already had a slight decrease in value as they reside at $2.095 – more than the capped price but less than some private investors may have paid.
That $2 capped price, which was applicable to nearly 60 per cent of the total share offering, was always likely to keep interest high. As the opening share price has indeed proven to be more than that amount, retail investors can sell immediately for profit which only helps drive even further interest from bigger investment firms. The fear is that as those shares are steadily sold, the overall price will decrease over time. This could then lead to Medibank executives having to make difficult decisions with regards to how they can maintain the value in the company.
If you are wary of the privatisation of Medibank and would like to learn more about your health insurance options and alternatives, contact HICA on 1300 44 22 01 for expert and impartial advice.