Fund managers have taken a dim view of the federal government's pricing of the Medibank Private float, arguing it was too steeply priced for a market debutant.
Medibank stock touched $2.08 on its second day as a listed company, before closing at $2.10.
Institutional investors were asked to pay $2.15 a share to participate in the popular float. Retail investors and policyholders were sold shares at $2.
The market response will be sure to translate to greater scrutiny of assets the government has earmarked for future privatisation.
As the seller, the federal government has lost some of its goodwill among the market, experts believe.
Medibank is a must-own stock for many big funds because their returns are benchmarked against indices. By not owning the shares, they risk going backwards if Medibank rallies, and as a top-50 company it is represented in almost every index.
Katana Asset Management portfolio manager Romano Sala Tenna highlighted the risks investors bore by participating in a public offering.
"Along with ownership of the company comes risk, and things don't always fall in line as planned, therefore new investors need to be compensated. In this case it's not, they've priced it to perfection," he said.
"The government's definitely had a win here but institutional investors haven't." The government got almost $6 billion from the sale.
Clime chief investment officer John Abernethy said one risk was that health insurance premiums become politicised and that interferes with some of the optimistic growth expectations attached to the stock.
"Populist policy settings suggest it will become a policy of an independent party or a left-wing party . . . that's exactly what's happening now, we're getting populist policy settings," he said.
Maintaining the rate of premium growth, which has advanced faster than inflation, could push members to cut back extras cover or fall back into the public safety net.
"When [it was a] government-owned enterprise there seemed to be some sanity to the market. I think premiums have been pushed up aggressively coming into this float over many years," Mr Abernethy said.
Mr Abernethy theorised that the retail price of $2 was the flashpoint for the stock that it will be judged against.
Underscoring the division in the market, another fund manager said that the negative experience on the institutional side detracted from the business's positive outlook because Medibank promised growth where it was difficult to find.
Medibank was attractive for the potential to lift productivity and margin within the organisation, as well as being the dominant player in an industry with favourable demographics.
It will be a few days before funds have to register any change of interest in the company with the ASX and the buyers and sellers are known.
Professional investor George Boubouras thought the valuation to be reasonable and the fees paid to the advisers who handled the offer were not as high as some historical floats.
"[Chief executive] George [Savvides] has got a very clear mandate about what he's got to achieve and if they don't turn around that market share slip of the past two years, the market can react accordingly," he said, calling it a "great business".
"To have a really determined, sustained plan to increase market share, particularly from NIB, you need to have a workforce so engaged and drilled that they're sharing the same message, that they understand what top management are required to do from their shareholders."
