SFC criticises hype over big subscriptions

SECURITIES and Futures Commission (SFC) chairman Robert Nottle has criticised the notion that only heavily over-subscribed public stock issues are successful.

''I would like to pour some cold water on expectations about the relationship between the level of over-subscription and the success of a public float,'' he told the Australian Chamber of Commerce yesterday.

''The hype which has surrounded a number of new floats over the last 12 months seems to have led to a situation where the market judges a float to be a failure if it is not over-subscribed by some hundreds of times.'' ''I do hope some sanity can prevail in future and that this expectation is scaled down considerably.'' Mr Nottle said the biggest problem posed by massive over-subscription was that it impeded market efficiency and the ability of companies to raise capital.

''Higher over-subscription means there is a higher cost to raise money.'' He said the SFC was examining over-subscription with the stock exchange, and a joint report would be issued soon.

Mr Nottle's comments followed an announcement by Four Seas Mercantile Holdings on Wednesday that its public offering of 60.75 million shares had been 562 times over-subscribed.

The issue that attracted the most interest this year was Denway Investment, which was 658.38 times over-subscribed after 195.5 billion share applications were received.

The issue of over-subscription came to a head last month when Shanghai Petrochemical's $2.9 billion offer was only 1.77 times over-subscribed.