BHP Billiton’s (BHP) spin off South32 (S32) has joined the ASX with a market capitalisation of $10.9 billion at the close of trading yesterday, with the shares weaker at $2.05 after a wave of selling pushed them lower in afternoon trading.
BHP shares fell as a result of the spin off and the 7% plus fall yesterday contributed heavily to the 73 point fall in the ASX 200, along with a sell-off in bank shares.
The shares of the company (ASX Code S32) started at $2.13, jumped to a high of $2.22 (all at the lower end of the suggested pricing range) before being driven lower by the wave of selling from many investors in London who will have to sell their shares because of the lower rating for the shares (and they are unable to hold these shares in their portfolios) compared to the rating for the former parent BHP.
BHP shareholders received one share in South32 for every BHP share they own.
The company, led by former BHP chief financial officer Graham Kerr, became Australia’s third-largest miner by market value and sits in the top 50 companies by market capitalisation, behind its former parent and Rio Tinto (RIO).
BHP shares closed down 7.2% at $30.13, so the company’s market value fell by close to $8 billion, while S32’s market value of $10.9 billion means that close to $3 billion in value was created for BHP shareholders.
The company’s shares will start trading in South Africa tonight, and then London.
CEO Graham Kerr yesterday played down any suggestion he might be disappointed by the debut price.
“I wouldn’t say I’m unhappy, but I’m not focused too much on it, to be honest,” Mr Kerr told the media in Perth. He said he was focused on reducing costs and improving efficiency in the face of weaker commodity prices.
Fairfax Media reckons that Australian fund managers will need to buy 190 million S23 shares to bring their weighting in the stock up to ASX 200 levels.
South32 contains BHP’s non-core aluminium, manganese, nickel and zinc mines.
The shares are now trading on a when issued basis. The shares will start trading on a normal settlement basis on June 2.
