A quick potential idea for my Dutch readers

I don’t think a lot of people in the Netherlands will have missed the fact that ABN Amro is going to relist on the Amsterdam stock exchange this month. It’s big news in the mainstream media because ABN Amro was nationalized in 2008 at a cost of €21.7 billion for the Dutch tax payer. The bank has currently a book value of €17 billion, and the Dutch state appears to be willing to take a small loss on the bailout. They intend to IPO certificates for a price between €16 and €20 which implies a valuation between €15.0 and €18.8 billion.

I’m not particularly interested in owning ABN Amro, but what is interesting is that Dutch private investors get a preferential treatment in the allocation of shares. Individual investors will get a full allocation for the first 250 shares unless more than 10% of the shares that are sold in the IPO are necessary to do this. To hit that number more than 75 thousand investors have to request the full 250 share allocation, and I think that that is unlikely to happen.

Participating in an IPO is on average profitable, but the problem for retail investors is that you run the risk that you only get an allocation when there is not a lot of interest in the deal. Because of how this deal is structured that’s not going to happen here. At the same time, we know in advance that this is not some hot web 2.0 stock that could make a huge jump on the first trading day. It’s just a boring bank. But I do think that it is highly likely that the IPO will be priced at a point where it is more likely than not that the stock will make a small jump on the first trading day. So I’m going to subscribe to some shares, and we’ll see what will happen :).

Random ABN Amro picture

Disclosure

No position in ABN Amro at this moment

8 thoughts on “A quick potential idea for my Dutch readers

  1. Maarten

    Benjamin Graham just turned himself over in nis grave wit disgust; participating in an IPO for anticipating a first day’s price increasd. Beter reread The Intelligent Investor.

    Maarten Visser

    Reply
  2. Angry German

    This is outragous! How can they discriminate against me as a German? Aren’t we all Europeans?
    I am now pro autobahn charge for Dutch people only and an extra charge for their caravan!

    Reply
  3. Pietje

    Hypothesis: given that the ABN was priced at the cheap end of its IPO range, given that it would be a disaster for the government if the stock collapses after the IPO and given that a momentum effect exists for stock prices it would have been a good bet to hold on to your position for a while longer (and might still be a good bet), even when doing hardly any fundamental analysis.

    Do you agree? Even if true it’s at best a marginal idea though.

    Reply
    1. Alpha Vulture Post author

      It might have been a marginally ok idea, but the government of course doesn’t control the market price of ABN. And I also don’t think that it would be that big of a disaster if the stock would have traded down a little bit.

      Reply

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