A market valuation for Optus pre-listing: a case note

Royal Melbourne Institute of Technology
Publication Type:
Journal Article
Accounting Research Journal, 2009, 13 (2), pp. 90 - 94
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Predicting the price at which a stock will first list on a stock exchange is not an easy task. In this paper we present a market valuation of Optus based on data available before the listing date. As a by-product of our analysis we provide a method of valuing some non-renounceable rights issues. The valuation of Optus is based on the price behaviour of shares in Mayne Nickless. A large tranche of the Optus shares were to be made available through a non-renounceable e~titlement offer to shareholders in Mayne NIckless. In principle, by observing the exentitlement price drop on Mayne Nickless shares, an estimate can be made of the value of Optus. In reality there are complications in this approach. For example, Mayne Nickless went ex-dividend and ex-entitlement on the same day. We overcome these problems by utilising price differences from concurrent trading in Mayne Nickless shares, ex-dividend/exentitlement, and ex-dividend/cum-entitlement.
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