Investors in Meridian might feasibly be asked to pay less than $1 upfront for each of their shares after the company made a late change to its share structure.
Meridian said today that it had issued 962,999,998 new ordinary shares in the company, boosting the total number of company shares to 2,563,000,000 ordinary shares.
This change was made ahead of the expected details of the share offer. See here for articles on SOE floats.
What the change means is that about 1, 256,000,000 shares will be sold to the public (being 49% of the total).
If seemingly informed speculation coming out of Australia is correct the offer might be priced to raise around $2 billion, with the shares listing on NZX on October 29.
A total price of about $2 billion would give an issue price of the shares of around $1.60.
Given that investors only have to pay for 60% of the price upfront, this could mean investors being asked to pay less than $1 per share upfront, with the rest being settled in 18 months.
The Government has already indicated that shareholders can expect full entitlement to dividends in that time.
Based on the $295 million after-tax earnings Meridian made this year (although you could expect next year's forecast profit to be higher), this could equate to about 11.5c a share in dividends, or an indicative gross yield of around 12% on the shares - based just on the upfront 60% purchase price.
The full details will be made available later today.
The final pricing will not be revealed, but this offer, unlike the Mighty River Power offer earlier this year, will have a price cap - a maximum that "mum and dad" investors will be expected to pay. That amount will be publicised today.
49 Comments
This is starting to look like something between the electric atmosphere at the Melbourne Cup and huge lolly scramble at a grandchildrens birthday party .
I might just be persauded to take a punt and climb in after all .
For a Dollar down, we get a good yield for a while ... until the chickens come home to roost when the smelter closes.
I Hope not to put my back out which is what happened at the last kids lolly scramble I got into
I guess you are a regular at SKYCITY's casino for added weekly excitment.
I must say I prefer the Berkshire Hathaway ethos of screening out the weak holders.
Thanks for the link , when I did my Bus Ad Postgrad ( Wales ) , we had every man and his dog opining and lecturing us on Warren Buffet and his business , his methodologies and investment strategies .
I could not afford shares then , and they look too expensive for me now .
As to the Skycity dig , I am such a tight-arse I would never set foot in the place.
Share ownership is a gamble , but I am sure you know that statistically , its better to be a shareholder in a casino than a punter
Buffet and Munger are not the smart investment operators they are made out to be - but they executed a very forward thinking action - they hired the most clever Indian fellow (forgotten his name now) who controlled their insurance business - his famed management of the "float" provided the consistent cashflow to enable the investment side of the ledger.- Buffet has publicly admitted this in the past.
So Meridian may have a post IPO capitalization of $NZ 4.1 billion . Which puts it on a current PE of 13.9 , given the previous year's NPAT .... an earnings yield of 7.19 % ....
... not too pricey , but not really a bargain either , for a low growth company , facing uncertainty of it's major customer's smelter ...
Just another one of the Nats efforts to pick winners for us.
They are at it again in the internet services area as well:
The Government has earmarked $15 million towards a second international internet cable between New Zealand, Australia and the United States.
As well as the $15 million contribution, the Government would also commit to being an anchor customer on a new cable fit for research or education purposes, says Communications and Information Technology Minister Amy Adams.
Adams is calling for expressions of interest from companies considering building a cable, she said in a statement today. Read more
I thought Key would move on and quit trying to fail after the Chorus/UFB debacle:
But the Government's intervention is more than just a disagreement over methodology. It reveals deep insecurity about the huge public investment in fibre broadband. If people will really prefer cheaper copper to same-priced fibre, what does that say about the value of fibre? Read more
smelter issue doesn't bother me. Short to medium term issue maybe, long term it will be sorted. I'm picking anytime soon those P.I's in Auckland will be looking to cash out - sick of dodgy tenants, no profits and needing some cash flow for retirement - watch the dividend paying coys share prices move as this cash arrives...
Do you understand arbitraging?
If you dont - you should - depends on how much you have invested
Read this comment
http://www.interest.co.nz/news/66399/government-says-meridian-energy-will-be-listed-october-29-options-partial-sales-air-nz-an#comment-751361
Then read Gummy's comment above
Or if you really want to unsettle him you could recommend he take your advice from yesterday
Okay so I a limited to having a non-academic understanding of sharemarket arbitrage , but I am not trading my MRP shares, or looking to buy low and sell high .We are long run, 10 year investors so arbitrage does not factpr in my buying decision
My price average in two tranches is just above the current price , but I have no intention to crystalise the loss , nor do I need to .
The yield is better than the banks term deposit and there is potential upside, or downside in the price, and I can live with that , simply because I am not a speuclator ,
We dont need the capital we have invested , but may need the cashflow one day when I retire..
By then , hopefully the yield on an histroical cost basis will be over the elusive 10% per annum on passive investments.
As to the dangers you see..... well I dont see them .
Maybe you see risk differently
Yes Elliot - but he works for a large Chicago based FCM servicing institutional business - he does me a favour for all the execution business I put thru him when I worked in London. I am not at liberty to divulge his full details without talking to him first - he has little need to do my piddling small lot stuff never mind fielding phone calls from potential odd lot clients.
In the first instance I would contact a NZ broker, possibly OMF, and if you consider yourself a pro non retail client try ICAP.
Stephen Hulme. "There is no such thing" Sorry Stephen but there are plenty of those. It might not be your way of doing business but being a long term investor is quite a good way to do things.
One reason to do things that way is that to constantly trade/ margin etc means you are in playing in a field with skilled professionals.
Plenty of people buy some shares, plan to keep them for a long time, maybe they review their holding every year but usually hold.
As for fund management fees. You can buy shares without those. Besides fund managers also like the churn transaction fees.
Please tell me how I am to efficiently allocate hard earned capital when corporate profit proclamations are publicly called into question in respect of their authenticity?
The good news is the combined net earnings of the 24 companies covered in this column increased by 11.5 per cent compared with the previous year while total dividends rose by 10.3 per cent.
And most of the outlook commentary for the next six and 12 months is reasonably positive.
The bad news is the majority of companies have lost confidence in our accounting standards and are now highlighting their underlying, normalised or adjusted earnings instead of audited profit. This is a very worrying trend, particularly for those who experienced the creative accounting excesses of the 1980s.
Lax accounting policies resulted in a disastrous misallocation of capital 30 years ago as investors poured money into companies that reported inflated and unrealistic profits.
Why is the accounting profession allowing this practice to develop again? Is there any leadership at the New Zealand Institute of Chartered Accountants? Read more
The burning question is whether companies are deliverying free cash flow from operations to fund dividend payouts or, as are many are doing, resorting to issuing debt to fund dividend returns on publicly traded equity.
All the above creates an air of unsustainability, which I choose to avoid.
My favourite
the marathon effect
Investing and trading can be likened to running a marathon. As anyone who has run a marathon will know, you cant step straight out and run a marathon. It requires considerable training, preparation and conditioning. You need to be able to run one kilometre before you can run 42 kilometres. If you cant run one kilometre, unlikely you can run 42 kilometres. Serious marathoners will build up to running 250 kilometres per week in training, week in week out for 6 months, culminating in speed work over the last month. Thats running 1 kilometre and repeating it 250 times. Similarly the novice trader needs to understand the very short term first. Pick a time frame. ie the opening session from 0949am to 1000am. Focus on that one single time period. Dissect it. Examine it. Master it. Do not trade any other time period until you have mastered it. Once mastered, move to another time period, or extend the chosen session. Like the marathon you will not last the distance if you do not understand or cannot perform over the shorter distance. Repetition is a very large part of any athlete's training.
The ONLY point that I am making is - if you want to sleep peacefully at night - and invest for the long term - you should learn the pitfalls of the short term "first" - it changes your perspective and understanding dramatically - and then you can understand and adjust accordingly
Consider any losses you may incur in short-term training as per Stephen Hulme as money well spent in the long term - it will save your bacon in the long run
I might be right and I might be wrong - in my opinion - the right-pricing of MRP is $1.80 max - and this is the 3rd time I have stated it. Note I said MRP not MER
PS: It takes a few hard lessons to learn not to "fall in love" with any investment.
I constantly attempt to calculate the higher levels of risk necessary to recover the losses of a losing trade with less capital - invariably the risks outweigh the potential rewards and thus the losses are generally not recovered. As iconoclast notes, it is best to be very aware of that which you pay to others to unload their not so money like position - You have to be clear about what is prompting them to seek your cash in preference to that which they own.
PS: It takes a few hard lessons to learn not to "fall in love" with any investment
Very good advice iconoclast, people should listen. Had my financial heart broken too many times by being not willing to let go of an investment, when all the signs were there that it was time to part ways.
A worthy discussion for those new to shares or plain passive investors. The psychology to let go of investments and cash in and accept a loss is a great challange when you begin.
People should not be too worried about MRP, if they had watched over the Northern summer to the taper QE theory noise they would have made more than a enough money knowing it wasn't going to happen :-)
I really wonder if it was all a jack up, hope you all were on the right side of it :-)
I started buying/trading shares a couple of years ago and have (what I think) is a couple of helpful tips.
Get a book and read up on trend line analysis (inverted triangles, head and shoulders patterns, etc), it's not heavy reading and will help you manage the short term side of things and give you a better idea of when to buy. As far a what to buy you just have to pick a good company in a growth industry and your long term prospects will be good (eg Rymans and healthcare).
Set up a watchlist on a online trading platform and you can have pretend portfolios where you can see if your theories/picks play out.
Don't panic if the share drops in value, if you've followed the above advice on what to buy it will come right eventually.
Best to have a broad range of shares you follow on a watchlist and swap between them as trends go up and down, this way you'll make the most of the ups and minmise the downs.
Get advice from a broad range of people or sources, don't rely on one.
Yay....It's Friday...hooo tough week.!
But today to contribute to this interesting investment thread and hopefully make you smile in doing so.....
Investment advice should always be in line with your objectives, conveying them is an important stepif only to yourself.
And.....so
An American investment banker was at the pier of a small coastal Mexican village when a small boat with just one fisherman docked. Inside the small boat were several large yellow fin tuna. The American complimented the Mexican on the quality of his fish and asked, "How long does it take to catch them?" The Mexican replied: "Only a little while". The American then asked why didn't he stay out longer and catch more fish? The Mexican said he had enough to support his family's immediate needs. The American then asked, "But what do you do with the rest of your time?" The Mexican fisherman said, "I sleep late, fish a little, play with my children, take siesta with my wife, Maria, stroll into the village each evening where I sip wine and play guitar with my amigos, I have a full and busy life." The American scoffed, "I am a Harvard MBA and could help you. You should spend more time fishing and with the proceeds, buy a bigger boat with the proceeds from the bigger boat you could buy several boats, eventually you would have a fleet of fishing boats. Instead of selling your catch to a middleman you would sell directly to the processor, eventually opening your own cannery. You would control the product, processing and distribution. You would need to leave this small coastal fishing village and move to Mexico City, then LA and eventually NYC where you will run your expanding enterprise." The Mexican fisherman asked, "But, how long will this all take?" To which the American replied, "15-20 years." "But what then?" The American laughed and said that's the best part. "When the time is right you would announce an IPO and sell your company stock to the public and become very rich, you would make millions." "Millions.. Then what?" The American said, "Then you would retire. Move to a small coastal fishing village where you would sleep late, fish a little, play with your kids, take siesta with your wife, stroll to the village in the evenings where you could sip wine and play your guitar with your amigos."LOL - took the exit route in 1998 - just need this bloke Joyce to stop spending the taxes taken from the stash to pursue the dreams of ultra rich men. Watch video here
Stupid of him to get filmed with his yacht in the background.
Wonder how many of those envolved with the challange could be on this list?
http://www.icij.org/blog/2013/04/release-offshore-records-draws-worldwide-response
Listen to the chatter
I provided a consulting service to an Australian Financial Planner for a number of years. He had a medium sized office with 6 staff managing about $100 million for private high net worth individuals in the form of SMSF's (self managed super funds). This Financial Planner, or Financial Advisor, with a whole bunch of letters after his name, including CFP SSA, had no formal qualifications.
He was a "long only" operator, investing for the long term only. Never a seller.
Of relevance to this conversation is - He was in the business. He was what would be considered by most of the investors here, a "professional".
(a) Superannuation Fund are set up or formed with a "mandate" equivalent to a set of "articles of association" which have to be adhered to.
(b) He had an on-going long-term love-affair with charting. He was a charting "guru" a member of the congregation of the church of the squiggly line
(c) He maintained a chart going back to the early 1900's of the Price Earnings Ratios of all the main indexes which indelliby established a view that when Price Earnings were below 10, it was time to buy quality shares, and when above 20, do not, never ever, buy.
The implications of the "mandate" the manager has to live by, are, he has to be invested at all times, he cannot hold cash. Otherwise he can be held liable to account for any missed gains.
Unfortunately, because he had a "long only" outlook, and had to be invested at all times, he was exposed to those calamatous "events" that come along every now and then. He would get caught time and time again and wipe out 30% of clients funds. One occasion, at the time of the dot.com.bomb he had a love-affair going with dot.com companies and blew up $30 million in two days. He experienced a few of those disasters.
In the end I had to give up on him and walk away. He wouldn't listen. His squiggly lines kept getting in the way. He didn't know how to protect capital.
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