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Vodafone slashes value amid doubts over float

By Michele Simpson

Friday 26th May 2000

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NOT GETTING ENOUGH: Analysts say Vodafone float is overpriced
Fast-growing cellphone company Vodafone Pacific is scheduled to launch its prospectus to fund managers today after slashing its valuation amid concerns it should be floating at all.

Across the Tasman the $A375 million float of ComVergent Telecommunications was yesterday pulled for the second time when lead fund managers JB Were and Credit Suisse First Boston decided to postpone the offer indefinitely.

Fund managers here and in Australia this week believed the Vodafone float for 17% of the company, was overpriced.

The float had been aiming to raise between $A1.5 billion and $A2.2 billion but it was thought that figure would be "substantially lowered" before the prospectus was launched to fund managers, a source involved in the offer said.

Local retail investors have been snubbed by Vodafone for the float, while their Australian counterparts are only getting a chance to snatch 10%.

Internationally, telco stocks have nose-dived in the past two months leaving investors nervous about the Vodafone IPO. Telecom's share price was $8.68 in mid-March and has since dropped to $7.93 this week. "The issue is whether it is a worthwhile float in this kind of market and perhaps they are going to have to accept a lower price," said one analyst.

But he optimistically added that Telstra floated during the Asian crisis three years ago amid a lot of speculation and concern, yet it was successful.

Vodafone Pacific is understood to have met yesterday with lead fund managers Goldman Sachs and JB Were to discuss the timing of the float and the price. A source connected to the float said six months ago local retail investors were still being considered as a target.

But Goldman Sachs does not have a presence here and was thought to have gone cold on this market.

"The mum and dad investors in New Zealand haven't proven to be good investors as they are too quick to take a profit after the float. They are simply not there for the long haul," said one local telco analyst. Australian retail investors behaved differently and usually bought stock in an IPO with a long-term plan in mind, he said.

The Vodafone Pacific float is breaking the 17% offer down with 60% going to international investors, 30% to Australian and New Zealand fund managers and 10% to Australian retail investors.

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