On Tuesday the 27th  of October, Poste Italiane S.p.A, Italy’s national post office, listed about 35% of its shares on Borsa Italiana, the Italian Stock Exchange, thus opening a new round of privatizations in Italy. Indeed, the long awaited IPO is either the biggest country’s privatization in 16 years or a part of the plan of the Italian government to realize some State sales, such as the ones including air traffic controller Enav Spa and railway company Ferrovie dello Stato, both already scheduled for next year, the Italian Minister of Economy Padoan said. These moves have the objective of raising resources to reduce the huge amount of public debt that Italy has, which is the second largest in the Euro Area. During the first day of trading, the utility company, whose ticker is PST.MI, did not perform well if we compare it with the one of its Japanese peer,which amazed the market with an outstanding advancement, or with the one of Ferrari, even if we have to bear in mind that they operate in two completely different businesses. Initially, the shares of Poste were up by almost 3% compared to €6.75 of the initial public offering, trading at €6.95, but then they closed at €6.70, down by about 1%.  So, if for the new shareholders poste has not been a bargain yet, Italian treasury may be happy about this trading day since it has maximized what it could have risen with the IPO.

Poste Italiane, headquartered in Rome, is one of the biggest employers in Italy with 142,000 workers and has its operations organized around different businesses. In details, it provides postal, logistics, financial, insurance and communication products. In the first two fields, while the company has suffered less the decline in the letter business compared with other European services, it has been sluggish in the market of parcels, a key component in the e-commerce world. Then, its Financial Services segment engages in the collection of savings deposits, the provision of payment services, foreign currency exchange and the provision of investment services. Finally, the company’s  Insurance Services segment offers life assurance and non-life insurance products. Unexpectedly, this is the division that generates the bulk of income for Poste. In fact, it accounts for 66% of the revenues while postal services account only for 14%. In spite of the adoption in the year 2002 of the long-term strategic plan for which innovation has become a priority in the Corporate Strategy of Poste Italiane Group, nobody expected this radical change in the Poste business structure. In effect, during the last decade, traditional services have halved, meanwhile Insurance Services have doubled, in term of income. This trend has been followed also in the 2015 half year results. Total revenue generated by the Poste Group during the first six months of 2015 amounts to € 15,950 million, an increase of 6.6% with respect to the corresponding period in 2014; in addition to the positive performance of the Insurance business, and the increased revenue of the Financial Services segment which increased as well as Other Services. Insurance division has achieved excellent results with Group insurance premium collection (generated by Poste Vita and its subsidiary, Poste Assicura) amounting to Euro 9.5 billion (Euro 8.2 billion in the corresponding period in 2014) earned mainly on traditional Class I and V investment and savings products, in which Group performance is particularly strong. The graph below confirms as above-mentioned.

Source: Poste Italiane

These data of development have been useful, during the 2 weeks of road show, to polarize the copious purchase orders of domestic and foreign investors; although the threshold of Euro 9 Billion was not reached, in fact it was valued at Euro 8.8 Billion. Let us take a closer look at the investors involved in this IPO and later the features of the share. Of the 35 % listed, approximately 27.3% of the offering was expected to go to retail investors while the remaining 72.7% to institutional investors, according to Italy’s Finance  Ministry. Among institutional, several attended with a considerable share, as Kuwait Sovereign Found with about 2%, also American and Italian founds: Fidelity, Oaktree, Blackrock and Pioneer, Generali, Kairos, Intesa Sanpaolo, respectively.

For the retail, the smallest lot was 500 shares, furthermore of the 435 Million of shares, excluding the greenshoe, 15 Million was reserved for employees, with a different minimum lot of 50 shares. The company priced its offering of up to 498.3 million shares (including greeshoe) at €6.75 a share, the midpoint of its expected range of €6 to €7.50 a share. Starting from the 27th of October, the beginning of negotiation, anticipations was verified. Due to its nature, as a long – term investment and not speculative security, share price did not have a sprint. The promise of a high dividend, at least 80% of the profit of 2015 and 2016 fiscal years, could better underline this characteristic. Moreover, an further suggestion of Poste policy comes from the loyal premium, which will guarantee an additional share for year-long owners of 20 shares. These factors have contributed to strengthen the demand, but for the moment they have been not able to push-up the stock price.

Andrea Maggioni

Gennaro Tessitore

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