U.S. housing IPO delayed, investors still sought

By Helen Chernikoff

NEW YORK (Reuters) - The launch of the first financial instrument for betting on U.S. home prices was delayed on Tuesday as the company behind the product seeks more and bigger institutional investors.

MacroMarkets LLC declined to disclose the value of the bids received so far for the widely anticipated initial public offering of two linked trusts through which investors can bet that home prices will either rise or fall.

"There's a lot of interest, but we needed to give people more time," said Robert Shiller, the Yale professor of economics who with Karl Case devised the widely watched housing index to which the product is pegged.

Shiller, also a co-founder of MacroMarkets, said major investors are leery of being pioneers in such a new product and are waiting for others to jump in before committing. "People need to think about the price (of the bid). They are afraid of making a mistake."

Among the initial bidders, bears trump bulls, said MacroMarkets Chief Executive Sam Masucci.

Optimists on the housing market will invest in the "up" trust, while pessimists buy into the "down" trust. If the index moves down, a portion of the up shares' value will shift to the down trust and prices will move accordingly.

Par value of both up and down shares is $25, but up shares are selling at a discount -- about $15.50 per share -- and down shares are selling at a premium, about $34.50 per share.

Investors might struggle to value an investment in this product because the Case-Shiller index has a built-in lag while the prices of the shares in the trusts are predicting the future of home prices, said Bill Rhodes, whose firm Rhodes Analytics specializes in research on investment alternatives to U.S. stocks.