3.13 The Global Coordinators conducted extensive marketing from 5 to 25 January 2006, carrying out over 350 one-to-one meetings to educate potential investors in Europe and the US. Responses were broadly positive although there were some concerns about the projected decline in guaranteed income from the Department, which intended to award more of the research budget through competition. The Global Coordinators proposed a price range of 165-205 pence based on the marketing and the issue price was set at 200 pence.
3.14 The Department took advice from the Global Coordinators on whether an offer to the general public was appropriate and were informed that this would be unlikely to have a positive impact on the share price achieved. They also felt that the complex nature of QinetiQ did not make it an ideal investment for the general public and would add significantly to the cost of marketing the issue. There was always an option for the public to apply for shares through a broker although there would be a low likelihood of a broker being allocated a significant number of shares for this purpose. The Global Coordinators cautioned that promoting this route could be seen as favouring affluent investors. Although ABN AMRO Rothschild, in their role as independent advisors, felt there was little downside to providing access to the public through brokers, the Department did not publicise this option until a late stage in the process.
3.15 Following the preliminary marketing, the Global Coordinators facilitated roadshows between 25 January and 9 February 2006 to establish the level of demand for the shares. These covered over 290 potential investors and indicated that the demand was over eight times greater than the available shares, including a greenshoe34 of 15 per cent, at the bottom end of the price range. The flotation took place on the 10 February 2006 and valued the equity of QinetiQ at £1.3 billion including £150 million of new money raised by QinetiQ. This represented an increase of over 10 times the £125 million equity value in February 2003. The Department received net proceeds of £300 million from the flotation after paying £45.3 million under the pension indemnity, agreed during the sale to Carlyle, and advisors' costs of £10 million
3.16 The decision not to promote the ability of the general public to purchase shares through a broker created a great deal of adverse publicity. Many members of the public applied for shares through financial intermediaries although the demand was such that they received only one sixth of the allocation they requested in common with the average for institutional investors. The negative publicity could have been avoided if this route had been publicised at the outset, while clarifying the risks this shareholding carried.
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34 A greenshoe option permits the sale of an additional tranche of shares to stabilise the share price if demand is high.