ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Monday, September 16, 1996 TAG: 9609180053
SECTION: MONEY PAGE: 6 EDITION: METRO
COLUMN: MONEY MATTERS
SOURCE: MAG POFF
Q: It appears that very soon Trigon Blue Cross Club Shield may change from a mutual company (meaning it is owned by its policyholders) to a for-profit stock corporation, held by shareholders. When they make the change to a new corporation, they will, of course, offer common stock for sale to the general public through brokerage houses. My questions are these:
*What brokerage firm will offer the initial public offering?
*What are the chances that an average investor will have access to these shares at the initial price?
*At what price or price range will the initial shares be offered?
*What do brokers believe will be a fair initial price?
*What do brokers believe the prospects will be for the new company, both in business growth and stock share increase or decline?
A: Vanessa Scharzer, a spokeswoman for Trigon Blue Cross Blue Shield in Richmond, said it is still too early to answer your questions. She said the last four are unanswerable, while the company is not in a position to answer the first question. Trigon has not taken actions that would provide the information because its plan to become a for-profit company is still pending the outcome of last week's hearings before the Virginia Corporation Commission. The SCC must approve the plan before any action can take place. A decision is expected sometime after Sept. 20.
George F. Shipp, a health care industry analyst with Scott & Stringfellow Inc., said Trigon has not said which brokerage firm would handle the initial offering of stock to the public offering.
If the stock is issued, Shipp said, Virginia investors will be able to buy shares through brokerage houses regardless of who underwrites the issue. But he said your ability to buy shares will depend on the number of shares issued and the number of investors (especially institutional investors that tend to buy large numbers of shares) seeking to buy shares. In other words, it will be controlled by the law of supply and demand.
Shipp said he also has "no good read" on the price at which the shares would be offered. He said the price would have to be set by the underwriters at a level that is fair enough to stimulate the demand needed to close the deal. "Price and availability go hand-in-hand," Shipp said. Once the stock begins trading, the marketplace will determine the price, as with any other stock.
Shipp has reserved his own judgment about what a fair initial price might be. He said he would have to see the pricing and read the offering documents carefully before reaching an opinion.
Trigon has many assets to operate as a stock company, according to Shipp. He cited the fact that it has the largest share of the health insurance market in Virginia, a strong structure and, if the proposal passes, good capital. Whether it will grow, he said, depends on the company's ability to keep or boost its market share and make acquisitions.
Shipp said it will be three months or more before most of your questions can be answered fully.
LENGTH: Medium: 59 linesby CNB