Building Society flotation hit by bear market

By Andrew Bushe

DUBLIN — A low price for the flotation of the First Active Building Society on the stock exchange has hit the hopes of the 216,000 strong membership, who will now receive much less for their 450 free shares.

The former First National Building Society set the float price at 225 pence, which will mean savers and mortgage holders will receive just £1,012.50, instead of up to £1,710 at the highest price mentioned. The price has since risen to 290p but fallen back to 275p.

When the float was originally planned a price range of 265 to 380p had been suggested, but the collapse in stock market values since then, particularly in the financial sector, has resulted in the much lower price.

John Smyth, First Active managing director, defended the unexpectedly low price, saying it was relative to other financial stocks in the Irish market.

"There obviously has been a fall-off in share prices worldwide in the past few months," he said.

He said that when the original price range was announced the stock market was at an historic high, but "as we have seen times change and we have to deal in reality," he said.

Apart from the 450 free shares for savers and double that for those with mortgages, the members also had the option of applying for up to a further £5,000 worth of shares or double that for mortgage holders.

Smyth said the shares had been four times oversubscribed by the membership, which means that the allocations will be scaled back.

Those who hold onto their shares will pick up a loyalty bonus of 22 extra shares after a year. Those holding them for another year get a similar bonus.

Smyth said that very few people had opted to sell their shares straight away. "I would take it they are looking at the market as a long-term investment," he said.