The Government's partial privatisation programme is under further pressure, with the Mighty River Power share price dropping sharply to well below the NZ$2.50 the shares were sold to the public for little more than two weeks ago.
The whole sharemarket is down today, reflecting a state of nervousness that is seeing markets drop throughout Asia and Australia due to a variety of poor economic indicators. A short while ago the NZX 50 Index, which measures the performance of the top 50 stocks, was down over 1% today.
The Mighty River did somewhat worse than that, down 4.5% to NZ$2.36.
For "ma and pa" investors who contributed the minimum NZ$2000 in the Government's NZ$1.7 billion sell-off of 49% of the company, this represents a book loss of well over NZ$100. And remember, if you wanted to sell the stocks today you would lose more than that because you would have to pay brokers' fees.
At today's market price the 49% of MRP the Government sold is worth around NZ$100 million less than the Government got.
While any rational investor will tell you that markets and stocks will have good days and bad days and knee-jerk reactions should be avoided, it is nevertheless a bad look for the Government that the MRP shares have dropped as much as 5.5% below their float price just 17 days after listing.
From the Government perspective, it was vital that the MRP shares got off to a good start - not just for the sake of MRP - but for how this would look for the rest of the partial privatisation programme.
In the recent Budget the Government committed itself to preparation for a 49% sale later this year of Meridian Energy. That's much bigger than MRP and could, in the right conditions, raise as much as NZ$3.2 billion.
But it is interesting to note that there was an out-clause in the announcement of the Meridian float. Specifically, the Government said: "Ministers have instructed Treasury to ready Meridian for a share offer of up to 49 per cent of the company, in the second half of this year, depending on market conditions."
The italics are mine. Yes, the Government has given itself an out if market conditions are looking iffy. And suddenly they are.
But even without the nervousness we are now seeing in equity markets, the MRP sell-off has to be viewed as a massive flop.
The Government tried to big it up as a great success that there were 113,000 investors. But that was against 440,000 people who had pre-registered interest in buying the shares, meaning that three out of every four would-be share buyers never fronted up in the end. The Contact Energy privatisation in 1999, which was smaller in terms of the shares offered to the public, attracted 225,000 investors.
And then there were the Greens revealing last week that of the 26.9% of MRP shares sold to retail investors, over half of them went to just 13,000 investors.
Right now it is looking distinctly suicidal for the Government to press ahead with a Meridian sale, even if the Goverment does try to sell it in two blocks as has been suggested previously and was stated openly today as an option by the Prime Minister.
But the Government is in a bind. It has to get its NZ$5-7 billion of targeted returns from SOE sales in order to achieve its wafer-thin surplus in 2014-15. Well, the Government doesn't put it that way, of course. But if it can't find the NZ$5-7 billion from the asset sales that it has committed to capital expenditure on new assets then it either has to shelve the new assets or borrow money and then, bingo, there goes the surplus.
This observer is increasingly prepared to bet that the Government's got another option - an early election.
Prime Minister John Key already has the look of a man on the election trail. His workload getting out and about the country at the moment is astounding.
Last night's TV One Colmar Brunton opinion poll was extraordinarily good news for the Government, showing that National, with 49% could govern alone.
What price an election later this year?
That way the Government can put the Meridian sale on hold and it doesn't have to stick to those recent Budget projections. Win an election later this year and all bets would be off.
There must be some people somewhere at least thinking about it.
45 Comments
"Last night's TV One Colmar Brunton opinion poll was extraordinarily good news for the Government, showing that National, with 49% could govern alone."
The Colmar seat projection results really hinged on NZ First getting 4% and not returning to parliament (NZ First do tend to pickup around election time, so I don't see that happening). But with the Reid Research TV3 poll reporting National down -2.3% and the Colman poll of the same time reporting National up 6%, My only conclusion is that the pollsters should consider expanding their error ranges
Also bear in mind all these polls assume electorate seats do not change hands.
Labour is at 33% as per Colmar Brunton. That is 6% more than last polling day. A 6% up in polling is sure to move some of those electorate seats to labour.
NZ First and Greens will pick-up more on election day than any poll would show.
I do not think that poll was good news for Nats
I suppose that means (Step one) You buy a dud and then feel bad. (Step two ). You buy more dud to make first dud decision feel better.
How about this. Step one. You buy a dud and then find it makes you feel bad.
Step two. You give $1000. I take two bricks and clap with your head between. You feel really bad, and your original purchase feels not so bad. Magic.
Rubbish, the Labour and Greens announced their plan BEFORE the mum and dad investors committed any funds. It would have been sabotage practices if they waited until AFTER the sale.
Labour and the Greens did the honorable thing by being totally transparent and announcing their intentions when they did so that impact could be priced in by the market participants.
Honorable? You and I, my friend, have a significantly diffrent idea of what honor actually is...
The timing can be nothing other than deliberate, devisive and intent on reducing the value of the sale. The Fruit and Loop had over almost 2 years to come up with a policy to counter asset sales and to pull that sh*te out a few days before the float is disgraceful.
Politics in NZ has taken a very dangerous turn if opposition policy is to unwind previous Governments positions (and I'm talking about left to right as well).
It is nothing of the sort - and I really do pity your ignorance of the business model. Wholesale/generation prices represent around 40% of the final household bill. There are many costs in the supply chain and a blanket focus on a single one will not deliver the gains you ultimately believe are out there. It is utopian - and if it was such a big deal then I'm quite surprised it has taken until 2013 for it to become an issue when the greatest period of power inflation sat in the last Labour Government. Name me one thing the Government has run better than the private sector and I'll name you 10 they have screwed up (again, both sides of the political equation are at fault on this).
And you show blinkers on the rort of asset valuation to justify the increase in retail prices. The real generation cost at an internatioanl value is probably more like <15cents instead of 23cents. So the annual rip off of each household paid out to the Govn is more like $500~600 a year....that also makes it a regressive tax.
Now sure Labour are little better and they are only playing this way as they are in opposition and they see votes in it.....If auntie HC's mob had won this time they'd be no better, I accept that 100%.
Roll on the Green's getting in and pushing for fair feed in tarrifs so we get competition...bye bye share value...
regards
Greens and Labour should have said nothing.
A $2.70- $2.90 release price would have still seen the shares drop to this current price.
National should be thankful the Left raised the spectre to lower the IPO. The drop wasn't as woeful as it could have been. (Or should I say as woeful as it will soon be.)
I see the bottom point being just under $2.00, (p-robably about $1.92) Thats where I will buy.
Im sorry but what about their own judgement? Any market has Govn regulation that can change and risk and opportunity in that...its part of the equation......seems the right expect even more welfare than the mysterious welfare bludgers they go on about.
BTW, this is early days, a slight loss from the quick buck sellers losing their underwear is no biggee.
regards
And all the spin-merchants come out to play.
Spin 101 - throw what you're guilty of, at the other side. Eh, ITYS?
Too obvious. Try subtlety. I know it's hard, the 'sell' was theft from the poor to the rich, and covering-up the truth you're starting from a back marker.
The real lesson is that all sharemarkets must be overdue for a major correction, and that has implications for all sorts of things - ACC, Kiwisaver, the list gore on.
Not spin at all - just this ranter's humble view of the world on this given day. Quite happy to put a disclaimer on my politics next to a comment - and not effectively be a troll like your goodself PDK. Hunt with hounds, run with fox kind of a person you are. Ho hum.
Where are they now:
Andrew Barclay, a director at Goldman Sachs New Zealand which is co-lead manager of the float alongside Macquarie Capital NZ, and Credit Suisse Australia/First NZ Capital, told interest.co.nz interest remained strong in Mighty River Power shares.
"Post announcement of the policy, all parts of the market have responded well," Barclay said. "I think they recognise the opportunity presented by the circumstances."
http://www.interest.co.nz/news/64164/mighty-river-power-ipo-managers-ma…
depending on market conditions."
The italics are mine. Yes, the Government has given itself an out if market conditions are looking iffy. And suddenly they are.
But even without the nervousness we are now seeing in equity markets, the MRP sell-off has to be viewed as a massive flop
we refer:
http://www.interest.co.nz/news/64611/greens-say-majority-mighty-river-s…
the advisor/client dialogue will be a ripping yarn....
Being down 4% is not a slump, it is not a disaster.
It is a one day movement that will occur from time to time. For those that invested in MRP I would say ignore it.
I don't own any MRP, but am saying that this is not abnormal for share investing.
If a 4 % down day worries you, then you probably should not be in the stock market.
And what determined the issue price anyway. The 'float' was all myth and magic. Lots of hype. And nobody in the financial services industry talking any math at all.
Anybody who bought this, or any float, was taking a shot in the dark. Works sometimes and not other times. But no inforamtion based logic apparent in it anywhere.
I look at it this way.
The 'losses' are unrealised until ya crystallizes them by selling.
I bought 'em for Buy/Hold, bank the divvy flow. Nothing I've seen here has any effect on them divvies.
I did spot a probablity put upon the LabGreen 'One Supplier to Rule 'em All' strategy, in terms of actualising that dream. Within two terms - 6 years.
22%.
But fear not: Free Beer (um, Power) - Tomorrow
Vote Labour - get yer Greens for free.......
One thing is for sure MM, MRP is no GFF. Now that is enough to bring a grown investor to tears. Consistent dividenders rarely lose significant value - VCT a very good case in point. That's why most brokers call them boring. Will never be, nor pretend to be, a DIL/XRO.
ACCT101, moa male.
Until yer take some action on a recorded accounting entry subject to market fluctuation - shares traded publicly, an FX-denominated debt or loan - any day to day variance is placed into Unrealised Gains/Losses.
Ya has ter sell the shares, collect the FX debt, or repay the FX loan, to move these into Realised Gain or Loss.
Basic accounting.......
Real enough to run the world we all inhabit, provide you with the four basics (shelter, food, transport, security) and to engage the respondents with what Steven Pinker terms 'gentle commerce' - which builds trust and linkages across all sorts of tribal, intergroup, national barriers..
The 'unreality' occurs in two main areas:
- a reluctance to mark-to-market, where the market price can be established from several independent sources. This hits e.g. US banks' loan books, where 'extend and pretend' allows them to avoids Action which would crystallize the difference between the book and the actual value.
- the wide, wild world of derivatives, where almost by definition, the value of a given 'asset' is unquantifiable to ordinary mortals, or can be established only on the basis of a chain of linked 'what-if' models, with assumptions as to risk, counterparty actions, trends etc built in at every pass or linkage. But as there is a ticket to clip on every new derivative layer, That's Real $, for the practitioners......and this scam is Still being allowed to continue.
Why did people buy MRP when they could have bought an export company with annual growth in sales, revenue, profits and dividends...MRP is subject to endless govt manipulation with dividends highly likely to mirror media attention to power price hikes. Who can forget how Clark and Cullen destroyed the share value of AIA for party political reasons!
I see no future capital gains on any of the SOE shares, dividends no better than bank deposit rubbish and endless salary fat for SOE bosses and directors. Take a look at the div and share value history of Contact, if you want evidence!
Telecom was worse, as they haven't recovered from the $6+ price they were, and they are now a much smaller company.
AIA are doing well now, and aren't much below what the buyout price was, plus dividends. People have probably done better by not selling those shares during the GFC.
There are still plenty of monolpolies/duopolies to regulate.
Smokey...unless it's escaped you already, the whole damn world has been in buy and hold for a very considerable time now.
Captured monies Smokey....from goldbugs to currency to shares...etc etc....an awful lot of holding , not a lot of taking.
John Boy gave em a walk right in.....really glad I balked now....yesiree bob, damn near could have been one of the filthy few.....
Wherezat iconoclast got to ....checking to see if the powders still dry..?mmmmmm no sir, it's a wet mop in a dirty bucket is what it is
Can't wait to hear the Meridian pitch.....should be a doozy, including a sudden jump in MRP shares.
Anyhoo back to the heater...I gotta get well ....and get well soon.
doanchoo wurry
Market Maker busy today - taken it down to shake out the weak longs - suck a few shorts in - then back up to $2.60 to shake out the weak shorts
Today at the closing bell
Closing Price $2.38
398 trades
Total value $22 million average $52,000
Volume 8 million average trade size 22,000
Then closing single price auction (cspa), after the closing bell
Final Closing Price $2.41
Final 436 trades
Ho Ho Ho Ho tol'ya, got the whisper, gotta hold it up, that wasn't retail stuff
No Kimy, we (CFH) lent the split off Chorus unit the thick end of $1.0 billion without obligations other than price floors for old technology .
Telecom will split Chorus off into a separate company by the end of 2011 and CFH will invest NZ$929 million directly in Chorus with 50% being non-voting shares and 50% interest free loans.[3] For the other three companies, they will each form a joint venture known as a local fibre company with CFH: Whangarei Local Fibre Company Limited, UltraFast Broadband Limited. Read on
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