By Andrew Bushe
DUBLIN — Ireland is gripped by unprecedented share fever, with would-be investors borrowing millions of pounds in order to grab an early stake in the Telecom Eireann stock flotation this week.
The government warning with advertisements promoting the country’s biggest-ever privatization — "the value of shares can fluctuate" — is being ignored as the hysteria builds up toward the application deadline this week.
The public can apply for between £250 and £100,000 worth of shares, with higher applications expected to be heavily scaled back due to the demand.
The investor maxim of never borrowing to buy shares is being widely ignored. One ambitious family of gamblers is reported to have sought a loan of £700,000.
Other starry-eyed optimists are hoping to get sufficient shares and make a large enough profit with a quick sale to allow them to make a substantial dent on the huge mortgages necessary to buy a home in the spiraling Celtic Tiger property market. Even school leavers and students are borrowing thousands.
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Applications to register for shares were received from 1.18 million of 2.8 million adults in the country and many appear to be now following through with applications to buy shares.
Financial institutions are offering special "cheap loans" and dealing rates. They are expecting a last-minute rush by customers to jump on the bandwagon this week.
If it all goes wrong with a stock market correction in the next few days, there will be a lot of shocked gamblers and a costly political fallout.
With only 13 percent of the population already owning shares, most of those caught up in the hype are novices when it comes to a stock market punt. Newspapers are carrying lengthy question-and-answer articles and Telecom tips columns.
The huge interest has meant the government will sell the full 50.1 percent it owns. The crucial decision for the cabinet will be the offer price in the already announced range of £2.64 to £3.27 per share.
The nearer the price is to the upper limit, the more money for the Exchequer so the Department of Finance is favoring a figure in the higher range.
Enterprise Minister Mary O’Rourke is arguing for a lower figure to ensure the float is a popular success and, as a result, attract people into buying shares when other semi-states are privatized.
Most of the profits from an immediate substantial jump in the share price would go to the institutional investors who are getting a minimum 40 percent of the shares on offer.
But the tens of thousands of borrowers taking a punt for the first time are also voters. If they end up with a tiny profit after paying interest and costs — or even a loss — many may blame the government and take their revenge at the ballot boxes in the future.
The final price and the percentage allocations will be made public on July 7 and conditional dealing will begin in New York, London and Dublin the day after. People should received their share certificates on July 15.