Medibank Private’s float will open to the public on Tuesday, but analysts say retail investors are being kept in the dark.

From Tuesday on, ‘mum and dad’ investors will be able to apply for a dollar amount of shares.

But investors will not know how many shares they will get, or how much each share will cost, until the final pricing is announced on November 25, after the final price has been set by large institutional investors.

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The prospectus has given an indicative price range of $1.55 to $2 for Medibank shares, and the Federal Government has capped the price for small (under $250,000) retail investors at $2 a share.

Broker firm bids for share allocations are due this Wednesday, but many broking firms are believed to have closed the offer early.

One of the largest retail brokers, CommSec, is believed to have closed its offer on Thursday and Macquarie will do so on Tuesday.

The head of equities research at Morningstar, Peter Warnes, said this is having the effect of creating false demand and bidding up the price.

“When IPO’s were underwritten there was an opening date and closing date and you knew the price of what you were being offered,” he said.

“It makes absolutely no sense for these retail broker firm offers to be closed off so early – the only reason you can say is that it creates enough panic or fear of missing out so they’ll overbid and that creates false demand.”

Mr Warnes says small investors are being treated like mushrooms.

“Well you know how mushrooms grow, and therefore I’m saying that retail investors are kept in the dark and fed what mushrooms are fed – you know what mushrooms get fed,” he said.

“So I think they’re being used as cannon fodder quite frankly.”

Mr Warnes says the whole process has confusing for the average ‘mum and dad’ share investor.

In particular, the Federal Government has put a very wide price range on the shares, meaning the investors will not know whether they are getting a fair deal until after they have committed to buy.

“John public has the ability to put his application in and if he was pre-registered he’d get more than he’d normally have got,” he said.

“But of course he doesn’t know the price. You’re putting a dollar value on it rather than a number of shares, and I don’t know when the last time the finance minister of this country bought something he didn’t know the price of.”

– ABC