Fears for issue as Eurotunnel shares hit low

EUROTUNNEL shares yesterday fell to a new low for the year, raising fears that a further slide could leave the pounds 858m issue with the underwriters when it closes next Wednesday.

The shares closed 15p down at 288p, only 23p above the underwriting price of 265p. The value of the nil-paid rights fell to only 13p.

Last month there were claims of deliberate selling by lead underwriters to drive the shares down, to get a lower underwriting price. But the falling trend over the past few days has been to the serious disadvantage of the underwriters.

Analysts said there could be a vicious circle at work as the price falls, with some underwriters unloading part of their holdings of existing shares to reduce their overall risk if there is a flop.

The issue was announced last month at a deep discount of 25 per cent, giving big underwriters such as Swiss Bank Corporation leeway if the price weakened.

But the shares have now fallen 77p from the level at which the underwriting was agreed on 26 May. The underwriting price is only 8 per cent below the market price.

Many French and British small shareholders in Eurotunnel, who own 55 per cent, may not take up their rights because there are no special incentives.

If the price stabilises, these uncalled rights can still be sold in the market and the shares taken up by investing institutions. The underwriters would not be called on to honour their commitments, although in practice many of them will take up the unused rights. But if Eurotunnel shares carry on down the underwriters would have to take up the shares themselves.

The underwriting in the UK, unlike in France, was passed on to a large number of sub- underwriters.

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