The basic reason for the failure of- the recent $2.1 billion Flat share offering was that the world's investors simply were not interested in that amount of Fiat stock at the offering price, or anywhere near *It. Supply was far 'in excess of demand, causing the stock's market price to plunge.
Offered at a 4% discount from the September 23 closing price on the Milan Stock Exchange, the 8.5% block of Fiat common stock that poured into the market soon lost more than 6% of even its discounted value, as the underwriters falled to place the offering and sellers of Flat shares in Milan outnumbered buyers.
Pricing 'is critical to the success of any international stock o ring - along with timing, preparation, distribution and market making - and it can bc a delicate affair, requiring luck as well as judgement. It can also involve a host of variables, from currency considerations to the outlook for world oil prices.
As a general rule, thc stock price ill the domestic market is the fundamental benchmark. But, as the Flat offering demonstrated, 'it is sometimes not a reliable indicator. The size of' the offering can clearly influence demand, together with the company's international profile and reputation, the depth of its home stock market, technical considerations such as the settlement procedures involved and investor appetite and sentiment in different markets.