McGrath is likely to be in crisis talks after a second day of falls shaved almost 20 per cent off its listing price, amid speculation the group’s largest investor offloaded its shareholding upon opening.
More than 4.6 million shares changed hands on the group’s first full day of trade, bringing the stock’s price 6.3 per cent lower to end the day at $1.72.
Total losses now stand at more than 18 per cent since its listing price of $2.10 a share, with some analysts putting the moves down to weaker than expected performance on residential markets during the past three weeks, particularly in Sydney and Melbourne.
Others have argued the stock was overpriced from the start.
It’s a puzzling scenario for the group, which said it could have filled its offer four times over at $2.20 a share but chose to issue stock at $2.10 so as to avoid any serious corrections once the stock opened.
Advisers, including Simon Mordant’s Luminis, JPMorgan and retail brokerage Bell Potter, are likely to be on a mission to shore up support in the face of mounting scepticism.
The moves also cast a cloud over the listing ambitions of rival real estate groups, including LJ Hooker, which will not head to market until the second quarter of next year, and property investment tool Real Estate Investar, which has the joint backing of Domain’s Anthony Catalano and former REA Group chief executive Simon Baker. The group is reportedly seeking to raise $5 million at 20c a share and is targeting a listing in mid-December.
Founder John McGrath has said he won’t be “distracted” by short-term share price movements, which have already shaved more than $13m off the value of his 29.2 per cent shareholding. Top selling agents including Ben Collier, Adrian Bo, Bethwyn Richards and Shad Hassen are likely to be feeling the pain too, each holding a 2.25 per cent stake that is now valued at $4.8m, down from a value at listing of $5.9m.
Others close to McGrath and LJ Hooker insist that the falls stem solely from poor sentiment and argue the performance of both businesses will calm nerves.
This article first appeared in The Australian Business Review.