Tallinn Water pulls off successful IPO

  • 2005-06-01
  • Staff and wire reports
TALLINN - Last week's initial public offering of Tallinna Vesi (Tallinn Water) stock was hailed as a success by company officials and analysts, as the Tallinn city water company broke new ground for Baltic equity markets.

Tallinn Water sold 6 million shares and brought in nearly 870 million kroons (55.7 million euros) as both European and local investors snapped up the shares.

Since nearly 85 percent of small Estonian investors placed offers at the high end, or 160.38 kroons a share, and institutional investors bid much less aggressively, the final price was fixed at 144.73 kroons, or near the middle of the bidding band.

Estonian retail investors and Baltic institutional investors each acquired 20 percent of the offering, while Scandinavian investors bought 29 percent and investors from elsewhere in Europe 31 percent of the total amount. Retail investors oversubscribed what was on offer for them (1.2 million shares) by 1.6 times, while the subscription for institutional investors was oversubscribed sevenfold.

Most of the offers by Estonian small investors were made on the Internet. Lauri Lind, chief of the Hansabank stock markets department that managed the offering, said local investor activity had been slow at the start of the subscription, whereas a large number of offers were made in the final days.

In all, 2,233 retail investors acquired shares in the utility company.

Deputy Tallinn Mayor Toivo Promm said that the wider shareholder base in Tallinn Water would reduce political influences on the company. "As the circle of shareholders has considerably widened, decisions of Tallinn Water will no longer depend so much on political winds that might blow," he said at a briefing.

He said the company would also become more transparent. "The public will have more information about the company, and the decisions will be more transparent and understandable," he said.

Company Chairman Bob Gallienne stressed that the high level of interest among institutional investors showed the value of Tallinn Water equity.

The Tallinn Stock Exchange was scheduled to open trade on the shares on June 1. Analysts said they weren't ruling out that the stock's price could increase from the opening bell. Toomas Reisenbuk, chief of investments at the investment bank Trigon, said that while the stock's possible gains on the stock exchange depend on demand and supply, the IPO shows that demand for the shares exists.

Uhispank trader Peeter Koppel said, "I find that a price like this is setting a backdrop that makes trading certainly more active and more interesting than it would have been had the price come up to 160.38."

He added, "On that price level, the stock looks interesting in terms of fundamentals and has, according to my estimate, a certain amount of grounded growth potential, too. But I'm definitely not saying that the stock will head up like a rocket on the first day of trading."

The IPO's lead managers 's CAIB, Hansabank and LHV, an Estonian investment bank 's earned 30 million kroons (1.9 million euros) on the deal. The fee will be distributed proportionally to the number of shares each of the organizers granted.

Hansabank is entitled to buy up shares in Tallinn Water during 30 days from the start of trade in order to stabilize the market, as well as to sell them back to former owners of Tallinn Water.