Retail investors stampede into Toyota's new class of shares

[TOKYO] Japanese retail investors are flooding stock brokers with orders for a new class of Toyota Motor Corp shares, indicating the carmaker can fetch a good price for the issue and secure a new group of long-term investors.

Nomura Securities Co, which is handling the sale of the shares, has received 10 times more applications to buy shares than the automaker plans to sell in the retail-only issue, said two sources at Japan's biggest brokerage who were briefed on the customer orders. They declined to be named as they are not authorised to speak to the public.

"There are customers who closed their bank time deposits and applied for Toyota shares," said a salesman at a Nomura branch in Tokyo.

In another sign of strong interest in the new issue, Nomura has seen new accounts opened with it jump by 80 per cent from normal levels since Toyota announced the sale, according to another Nomura official.

Investors are attracted to the unlisted Toyota "Model AA" issue because the shares will pay an annual dividend starting at 0.5 per cent and gradually rising to 2.5 per cent in the fifth year.

That compares with returns of about 0.05 per cent or lower for five-year retail Japanese government bonds and time deposits at major banks.

Investors must hold the stock for five years, after which they can convert them to common shares or have Toyota buy them back at the issue price.

The sale could have consequences for other companies seeking stable long-term investors. Finance company Orix Corp has said it is considering a similar issue and will be watching Toyota's market experiment.

Nomura is limiting the sale to 50,000 shares per investor, but the strong interest could mean that not everyone who wants to buy will be able to do so.

Toyota plans to sell up to 500 billion yen of Model AA shares. It will price the issue as early as Thursday, and by next Tuesday at the latest, at 26-30 per cent above the closing price of the common stock on that day.

The world's biggest carmaker by sales aims eventually to sell 150 million shares, just under 5 per cent of its outstanding shares.

The new stock has faced opposition from foreign funds as the shares are only readily available in Japan. Toyota argues the shares would give investors more options in a country where most of the US$14 trillion in financial assets held by individuals are in cash deposits.

REUTERS