Small investors back away from EDF shares

22nd November 2005, Comments 0 comments

PARIS, Nov 22 (AFP) - Small savers turned heavy sellers Tuesday of shares in French electricity giant EDF, pushing them below their issue price despite a government claim that the part-privatisation issue was a great success.

PARIS, Nov 22 (AFP) - Small savers turned heavy sellers Tuesday of shares in French electricity giant EDF, pushing them below their issue price despite a government claim that the part-privatisation issue was a great success.

Stock in Electricité de France showed a loss of 1.97 percent at EUR 31.37 midway through the second day of trading in the part privatisation issue.

Brokers said that small investors who had subscribed at EUR 32.0 per share were selling heavily, with trading volume at 9.75 million shares worth EUR 306 million

The CAC 40 index of leading shares, meanwhile, showed a loss of 0.08 percent at 4,582.93 points.

At brokers Financière de l'échequier, portfolio manager Frédéric Plisson said: "In my view, it is small shareholders who are continuing to sell on Tuesday, even at a loss.

"The share was supported on Monday. But today, the share seems to be more active and it is the market which is in the driving seat." He commented that the issue price set by the state had been too high.

The manager also held that the medium-term price would be in a range of EUR 31.0-32.0 and that there was little potential for it to rise because it had been valued highly compared to its European competitors.

A broker at Deutsche Bank who declined to be named, said: "This fall was clearly on the cards from the beginning when institutional investors were against an unduly high price.

"Some small investors are continuing to sell, saying 'too bad if it's at a loss, it's all been for nothing, we'll buy next time'."

He also said: "Some small investors, who are counting on the share falling sharply in the end, are selling now to buy back later."

The price had ended the first day of trading on Monday unchanged at EUR 32.0.

The issue overcame fierce opposition from trades unions and had been held up as a big success by the government which said that a total of about 5 million people, including more than 100,000 EDF employees, had subscribed for stock.

But some analysts say the issue price was excessive given the level of debt owed by the group, the prospect that its nuclear power stations will age and the fact that the French state will continue to oversee its energy pricing policy.

The price for institutional investors was EUR 33 per share, while EDF staff had preferential terms.

The operation, reducing the holding of the state from 100 to 85 percent raised about EUR 7bn for the company and one billion euros for the strained public finances, while valuing the entire group at EUR 58bn.

EDF is the biggest nuclear power generator in the world and the biggest provider of electricity in Europe.

The government has sold holdings in five formerly state-controlled companies in the last three and a half years, with the receipts used partly to alleviate strained public finances.

The EDF sale was opposed by trades unions which believe public utilities should remain completely under state control, and opposition socialist agreed over the weekend to reverse the operation if they regain power.

Copyright AFP

Subject: French news

0 Comments To This Article