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Retail investors bid $4.8 billion for Medibank shares

The Minister for Finance, Mathias Cormann, has today announced that demand by the general public for Medibank private shares is likely to be over $4.8 billion.

“Processing of retail offer applications has yet to be finally complete, however it is estimated that total demand for the General Public Offer, Policyholder Offer and Employee Offer will exceed $4.8 billion”, the media release says.

By comparison, the Broker Firm Offer generated close to $12 billion in bids, but was scaled back to $1.5 billion. In other words, for each 8 shares bid for in that offer, on average subscribers will receive just 1.

And bidders in the broker offer may still be subject to a further 20% clawback – or reduction of around $300 million worth of shares.

The Institutional Offer opens tomorrow and will run until Thursday, 20 November 2014. It remains to be seen the total amount institutions will bid for shares, but given the private health insurer is likely to be among Australia’s top 50 companies, many fund managers are likely to be forced to bid.

The Finance minister notes that no decisions will be made on the split of share allocations between the different offers until after the Institutional Offer has been completed. The final price and the number of Medibank private shares investors will receive, based on the allocation criteria, is expected to be announced by Tuesday, 25 November.

Given the subscriptions so far, the float is likely to be heavily oversubscribed. Retail investors will probably pay the guaranteed top amount of $2.00 per share, although institutions may well pay much more. 2.75 billion shares are on offer, valuing Medibank at around $5.5 billion at the $2.00 offer price.

Analysts are also expecting the government to offer retail investors a juicy bone in the shape of being allocated more shares than the institutions. That could force many larger fund managers to dip into the market and buy shares, which could result in decent stag profits when Medibank lists on the ASX, which could be as early as next week.

Medibank won't pay a dividend until September 2015 - If you want dividends before then, you might want to consider this company.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

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