If the 'smart money' has it right then the Mighty River Power shares will be sold for NZ$2.50 or less, which would be a disappointing outcome for the Government.
Up to 49% of MRP is being sold by the Government, with the public offer due to close this Friday.
The indicative price range for the shares is NZ$2.35 to NZ$2.80, but the shares theoretically could be sold for more or less than the range. In the last big state privatisation, that of Contact Energy in 1999, the shares were in fact sold to the public at NZ$3.10, which was above the top price of the offered range then of NZ$3.
The early signs were good that the Government this time might be able to sell MRP at above the top NZ$2.80 price. The initial public response was overwhelmingly positive, with 440,000 Kiwis pre-registering interest in getting a slice of the action.
But the brakes were very firmly applied when Labour and the Greens came out with a policy that would see a single buyer for electricity introduced.
After the Government had arguably appeared to give the policy credibility, by slamming it, clear signs of nervousness appeared among investors. The organisers of the float have subsequently been vigorously attempting to talk down the potential problems to the float from the Labour/Greens policy.
But the gambling public are putting their money on a final price either at the lower end of the NZ$2.35 to NZ$2.50 or even below it.
The majority of people using the iPredict website, which allows betting on potential outcomes of political and economic events, are betting on a price of NZ$2.35 to NZ$2.50. According to current betting patterns a NZ$2.35 to NZ$2.50 price is given a strong 67.6% probability. Next most popular bet is a price actually below NZ$2.35, with a probability of 15.9%.
In other words, based on current betting on iPredict, the very large majority of punters are suggesting that the shares will sell for only NZ$2.50 or less.
Even at the high end of the range punters are picking, NZ$2.50, the float would raise just NZ$1.72 billion, well adrift of the early estimates put out by brokers pre-float of a return of about NZ$1.9 billion.
But maybe the punters will be wrong. A price of NZ$2.80 would get the Government NZ$1.92 billion. The iPredict site has the probability of NZ$2.80 being exceeded in the float at just 1.1%
The Government may well be hoping the punters and the percentages are wrong.
6 Comments
I am sure that the market-savvy folk in power at the moment will take this as a sign that to get best price they should hold hold off subsequent sales until the uncertainty of the next election has passed. After all, there aim is to use the money to fund important infrastructure, not flog it to the market regardless of price.
I very much doubt that will happen dh, all it will mean is a lesser price. National signalled the sales along time ago, i.e. the people who were actually voted in by the public to run the country for three years. Labour/Greens do not get to do that until they have a chance at the end of that time, and all they'll being doing in the meantime is underminding the tax payer with zero good to come from it except for the benefit of share buyers, the lesser number of whom are LG supporters - talk about handing a bonus over to your opposition's supporters...the rich get richer, the poor get poorer, not desirable or smart politics.
"This lady is not for turning" I think thats the right quote.
Important infrastructure? no dogma, a few schools of course its going to be sold, even at $1 a share. The crazy thing is NZ could borrow right now at 3.2% for 10 years and start doing work now and save our construction sector, manufacturers and economy. I mean if you said inflation is nominally 2% that means you are borrowing at 1.2~1.5% if that isnt low cost I dont know what is.
When this stupid govn goes into PPP that has been a failure everywhere else the real interest rate behind that will be 7%+ I would think.
Like duh.
regards
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