Shares in Goodman Group fell almost 5 per cent when the Australian market opened on Wednesday following a $1.9bn sell-down on Tuesday night by China Investment Corporation that got repriced.
Investment bank Citi took a financial hit worth at least $35m on the trade and appeared to be left with about $1bn of stock after investors balked at the initial underwritten auction floor price of $37.55 per share.
DataRoom reported CIC was selling a 2.6 per cent in the industrial property powerhouse or 50.4m shares, in an auction with shares offered at a range between $37.55 and $37.60.
It equated to a discount of about 1.4 per cent to 1.5 per cent to Goodman’s last close.
Shares closed at $38.12 on Tuesday, up from around $33 in September.
But Citi later issued a message saying the price of the shares had been reduced to $36.85, a 3.3 per discount to the last closing price and the understanding was the book was not covered.
All participants were then issued the stock at the lower price, and with the deal underwritten by Citi, the Wall Street bank was left with a loss on the trade of at least $35m, which many believe will create a hit to bonus payments ahead of Christmas.
Sources say that while block trades can be repriced lower in the United States after being launched, the situation is rare in the Australia market.
As the market opened on Wednesday, about 23 million shares were crossed, leading some to conclude that is what Citi would have sold and may have been left with as many as 27 million shares priced at a combined $1bn.
On Wednesday, in early trade, Goodman Group shares were at $36.385, down 4.5 per cent before closing down 2.9 per cent at $37.02.
Brokers across the board were pitching to get on the trade for the industrial property group on Tuesday night, as first flagged online by DataRoom, with rivals offering discounts of 3.5 to 5 per cent.
CIC has had about an 8.9 per cent interest in Goodman, and its shares have rallied in recent months.
Its entire stake was valued by the market at about $6.4bn.
Market sources say in such instances, the pricing for large block trade deals needed to be cleared by various executives globally from the Wall Street bank involved and a risk committee.
CIC has held the interest for a long time and wants to lock in profits, say sources.
There’s now a 60-day escrow in place, preventing CIC selling any more shares within this period.
The last time that CIC sold shares in Goodman was in 2012, when it offloaded a 6.9 per cent stake worth $518m, crystallising a profit on its initial and much larger investment, which was made in the midst of the Global Financial Crisis.
Goodman’s share price has been on the rise in the past year, as investors sought exposure to data centres.
They remain in strong demand because of the need for artificial intelligence and cloud storage.
For the year to June, Goodman generated a $98.9m loss despite a lift in operating earnings.
Assets under management fell and the value of its property was down almost 3 per cent to $78.7bn.
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