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Wednesday, 29 June 1994
Page: 2359

(Question No. 1411)

Senator Watson asked the Minister representing the Minister For Finance, upon notice, on 30 May 1994:

  "With reference to the Commonwealth Bank share price of $8.19 in the week beginning 22 May 1994, which is considerably lower than the float price for small investors, does the Government agree that it has `ratcheted' up the float price excessively and that there are thousands of shareholders disaffected by the difference between the issue price and the current price."

Senator Cook —The Minister for Finance has provided the following answer to the honourable senator's question:

  The final price for the offering was determined by the Minister for Finance on advice from his Department and Joint Lead Managers in the knowledge that there was sufficient demand at that price to support the after-market.

  The final price was $9.60 per share and private investors obtained shares (up to a maximum of $25,000) at $9.35 representing a 25 cent per share discount. At the time of the offering the overall market was strong and the CBA share price reflected this strength. The final price corresponded to a discount to the market price at the time of almost 5%.

  The price on the first trading day after the sale was in the range $9.80 to $9.90 representing a modest profit of $0.45—$0.55 per share for private investors. The price at the end of the first week of trading was $9.95.

  Investors look to both capital growth and dividend income in making their investment decisions.

  The prospectus for the secondary offering of shares in CBA indicated to potential investors that the price of shares may go up or down.

  CBA is a blue chip stock and many investors purchase in the expectation of long term capital growth. Those investors looking for a quick profit had the opportunity to realise these gains.

  Investors in the secondary offering have already received a half-yearly dividend of $0.24 per share which represents an annualised dividend yield (based on the final price of $9.60) of 5% fully franked. This is well above the market average.