Whilst the Federal government sicced ASIC onto Telstra for supposedly breaching continuous disclosure laws earlier this year, it has been the government itself that has left the market uninformed through its actions in recent weeks.

Telstra shares rocketed 43c to $3.86 from its lows of early August until trading was suspended ahead of the prospectus release at 12.10pm on Monday and this surge was largely driven by speculation about the structure of the T3 offer.

When the detail was disclosed, Telstra shares went into reverse and lost 15c to $3.71 over the next ten hours of trading despite the overall market powering higher.

Punters were clearly buying the rumor and selling the fact, but all of this raises questions about exactly what the government will tell the public about the T3 offer process over the coming weeks.

A minimum of 15% has been set aside for institutions but there is a six day gap between the retail offer closing on 9 November and the three-day institutional book build which begins on 15 November.

The government should disclose exactly how much money is in the bank at this point and I’m tipping close to the full 2.15 billion shares could well be covered as this will require a commitment of just $4.3 billion from cashed up punters at the peak of the market.

If this happens the government will probably trumpet the news in order to further squeeze institutions, who will set the price for everybody provided it is not above the three day moving average leading up to the institutional auction process.

However, what will they do if the retail offer falls short? Should institutions be told there is a truckload of stock about and plenty of opportunity to drive the price down?

A disclosure policy should be publicly explained now and that policy should be to disclose the overall situation in detail. To not do that would leave trading in Telstra share fundamentally misinformed from 9 November until T3 debuts on 20 November. And we’ve already had far too much of that over the past few weeks.

Peter Fray

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