Winterflood Securities head of research Simon Elliot says Fidelity’s decision to buy its own shares on an ad hoc basis may prevent investors stagging Anthony Bolton’s China special situations trust.
Fidelity has had a special resolution passed to make market purchases of up to 14.99 per cent of its own issued shares following the conclusion of the offer for subscription and placing.
This allows Fidelity to address any significant imbalance bet-ween share supply and demand in the secondary market and to manage the discount to the NAV at which its shares may be trading.
Stagging is the practice of buying an initial public offering at the offer price and then res-elling once trading has begun, usually for a profit.
Elliot says: “What it will mean is that the premium will not balloon out to extraordinarily high double-digit levels. Additional share capital sitting in the background can be released as and when, so, for example, when it goes into the FTSE All-share and index trackers get involved, there will be shares for them.”
The trust will issue 650 million shares at a share price of 100p and an NAV of 98.9p at launch. Shares worth £400m will be available under the subscription offer, with a further £231m available through a placing. Bolton is to make a £2.5m investment.