Key thinks small, detailing protections for mum-and-dad investors
"I wonder how many people will borrow money to buy shares..."
Featured commentThe prime minister has confirmed his government is more interested in a politically palatable SOE sale process than one that will gain the best price.
At the National Party conference in Auckland, John Key has outlined special provisions New Zealanders seeking small parcels of shares in the 49% float of Mighty River Power, expected in September.
Mr Key announced four measures, all of which look squarely aimed at mum-and-dad rather than large insitutional investors:
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A minimum application for Mighty River Power shares set at a modest $1000.
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A guarantee that New Zealanders seeking up to $2000 worth of shares will not have their application scaled back.
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The provision of loyalty bonus shares in Mighty River Power for New Zealand investors, The details of a loyalty bonus were still being worked through, he said, but indicated it would likely require investors to hold their shares for three years to qualify. It will likely involve bonus shares.
- The appointment by Treasury of a retail syndicate of sharebrokers and banks to help potential investors – particularly first-time share investors – understand how they can participate in the share offer. The syndicate will shortly push the sale through an 0800 number and website called Government Share Offers. The website's home page features a Q&A with the questions "What is a share offer?" and "What are shares?" – presumably to satisfy the inquiring minds of mythic mum-and-dad investors. A find-a-broker link goes through to an NZX find-a-participant page that lists all major brokerages.
The government has previously ignored that a sale to a single larger buyer, or buyers, would yield the best price, but that it would accommodate the political reality that most want to see shares stay in Kiwi hands – although beyond the loyalty bonus there is nothing to stop a mum-and-dad investor immediately onsellng their shares to an off-shore party.
Speaking earlier on TVNZ's Q+A programme yesterday, the prime minister again made an analogy with the way Fairfax had floated Trade Me but kept 51% control – although he ignored that the media company took the offer to big Australian institutional investors first, to gain the maximum price.
Of the mum-and-dad sweeteners announced by Mr Key prove popular enough, there will be fewer shares available to large institutional investors.
He told the conference he envisaged 85% to 90% New Zealand ownership of the four power companies in line for partial privatisation.
Shares will be owned by individual New Zealanders, and funds like KiwiSaver, ACC and the Super Fund, he said.
The Maori Council's water rights claim would not affect the sale, Mr Key said. He told Q+A that a claim could also be pursued through the legal system but was unlikely to succeed.
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Comments and questions60
The problem being, none of this will stop control of these SOE's eventually falling into the hands of the PM's Chinese masters.
Before the xenophobia that is capturing our economy, to the detriment of all of us, launches itself on this thread, xenophobes need to answer for themselves the central question posed on this blog post: relating to Chinese businessman in the example - where is the outflow?
Concern about one way "trade" (i.e. money pouring out on NZ, never to return), and foreign control of critical infrastructure is not xenophobia, it's common sense.
No, one way trade is impossible: read the first example in my blog link and answer for me where the dividend outflow is. Tell you what, I'll reproduce just that part of the post below, let's see if anyone can answer it:
To really set the xenophobes aflame, the first dividend of $1,000 is going from the asset sales to a family in China that have invested in Mighty River. As a businessman has previously put to me, a mad, bad, sad ‘dividend outflow'. Only, is it? The dividend is paid in NZ dollars, useless to this family, so they must first exchange it for renminbi, meaning they must find someone to sell their NZ dollars too. Fortunately for them, via the beauty of markets, though they are never going to know them, an American family wanting to tour NZ buys the local currency, transfers it electronically back to a bank account in New Zealand, and the entire $1,000 is then spent in the only place it can be: here, in the cafes, restaurants, and on services. So, as no one has answered on my previous post, I again ask the patriots, where is the outflow here? Thus where is the problem?
(And then read the paragraph after this in my blog post, because that, also, is what is going to happen. The foreign ownership argument is not an argument against asset sales, it's irrelevant.
Beads and blankets... sigh
Meaning what, if anything?
Perhaps you might just stick to answering my question?
Americans have purchased more property than Chinese in the last 24 months.
Thanks, Rodney, for stating the obvious.
Yes, we already obviously own your mind.
dragon 1, the fact that I'm concerned about being a tenant in my own country indicates that I AM NOT under the control of others. Legitimate concern about this is always bashed by ticket punchers, ideologues, and the very same foreign "investors" that want control of what they did not build, or earn.
So some of us get to purchase assets we already own,others lose assets they already own and we all end up paying higher power prices on falling incomes...yeah good one.
Eh? What about all the debts and borrowings you also own on the other side of the ledger? How are you intending to pay them off?
That line about paying for an asset already owned comes up everytime from the morons who worship at the feet of Winston "owen glenn" Peters.
Our Government debt is one of the lowest (per capita) in the OECD. Our personal debt is what is high, and selling assets will only make this worse as prices go through the roof, the dividends go over seas, and New Zealanders currently working for SOE's get sacked to improve those very same dividends.
If you own an asset such as the companies involved, you get the right to dividends, plus to vote on the board: you have neither of those with these assets, so, you don't own them. Let's get that myth out of the way.
Regarding your other point, the private market model gives more competitive prices, over the monopoly of state. Proof: the 'successful businessman' on Twitter this morning asking why we would sell assets with superior returns to the 'taxpayer'. Well, superior returns, if he can prove that, means the consuming public must be getting ripped off currently.
And you're not losing 'control', even on your own terms: unfortunately National are pandering to the xenophobes and the uninformed, and only selling 49%.
What a bizarre logic you have. If we don't currently own it, then how can the government possibly sell it?
Or are you being completely honest and suggesting that the government is not representative of the people but in fact a non democratic entity that owns the asset in and of itself?
And of course we are losing control. Or do you disagree that 51 is less than 100. That equals a 49% loss of control. If i won 49% of a company Quite simple really.
What a bizarre logic you have. If we don't currently own it, then how can the government possibly sell it?
Or are you being completely honest and suggesting that the government is not representative of the people but in fact a non democratic entity that owns the asset in and of itself?
And of course we are losing control. Or do you disagree that 51 is less than 100. That equals a 49% loss of control. If i won 49% of a company Quite simple really.
Of course government is not representative of the people. That is naive. My vote has never meant a damned thing, nor will it ever.
And control goes on voting rights, and last time I did it on my fingers, a 51% vote will beat 49% every time.
Of course we currently own it, for if we didn't how could the government possibly sell it? It's not a "myth". In order to transfer ownership one must first have ownership. Therefore we own it. Quite simple.
Unless of course you are suggesting that the government is not "of the people".
Your "proof" is no proof at all since the taxpayer IS the consuming public.
51 is 49 less than 100 therefore of course we are losing control. 49% worth in fact. Only a fool would think they could sell 49% of an enterprise on an open securities market and still be 100% in control.
You don't own it. You never paid for it. You don't control it. You can't sell it and you won't get any of the proceeds once it is sold.
You won't buy it either, because you have greater priorities for your money and you have no explanation as to why the government should make owning a power station a priority either. You claim the shares will be sold at less than their real value but you won't buy them.
You are typical of the anti-asset sales cluelessness.
Cheers Alan. #17 is what's holding us all back. And that null mind will rule again in 2014. Stuff of nightmares.
'We' are not the government. I've never been 'gonerned' by a single party I've voted for. He never even read my log link to know what he was arguing against.
... governed by ...
Er, if you look at the time stamps both of the anon posts were before your link.
Mark, once again you call names instead of constructing a good argument. I'm guessing you're the Mark Hubbard that works at Business Intelligence. If so, you are obviously biased; you are one of those that gets to "punch the ticket" as prices soar. But don't listen to me - look at what has happened in the UK with reference to Asset Sales.
No, I'm not that Mark Hubbard. And names come after the argument. You've an important question to answer for me up at the top of this thread, Rodney.
Addendum ... that question at slot #4 is my 'good argument' ... bet you can't crack it. And if you can't, are you willing to say you're wrong?
O.K Mark, I'll respond to your "impossible" argument. You appear to have missed the fact that various banks in the world will take your NZ$ and exchange it for other currencies. Just about any currency. China in fact holds trillions of dollars US.
Assuming that the dollars have to be spent in NZ, don't you think they'll be used to purchase things aside from service industry? For example, the Crafar farms? (just an example). Mark, I have traveled widely and worked in several countries. Iknow for a fact that the people / companies / businesses that are salivating over our few remaining assets take the strategic view. Long term, we could have our way of life dictated to us. I will be buying as many shares as I can afford. Not to gobble up the dividends, but to keep a little part of NZ in the hands of an New Zealander. Note: Sorry about the mistaken identity!
No, you've missed the point, which is the $1,000 in Chinese investor's hand, has to uliimately be spent in NZ; there can be no out flow. And if used to buy NZ farms, then so what? Go directly back to my argument, in post #4 above.
And do you understand how evil nationalism is? Forget all the wars over 20th century, how can a protectionist, with clear conscience, protect a job in cushy NZ, which would mean denying a step up for a subsistence family in third world. That's one thing I've never understood about unions.
And as I say in my blog post, have you all forgotten the best way to a peaceful world, is global trade based on the voluntary transaction, and that includes cross border investment?
Oh, and I've set Google alert up for 'Mark Hubbard' and can report there seem to be 1,000 's of me, though I'm the only one, most likely, my mom could love ;)
Don't worry about disliking me, everyone, that's for kindy kids: answer my question at slot #4.
I do wish NBR would stop amusing the morons with the "Dislike" button. Like them, it's a complete waste of space.
A dislike, so someone who doesn't agree with my laissez-faire capitalist advocacy, couldn't care less about poverty in the third world? Bet that's not what they say to their friends. That someone should be examining their premises. Nationalism really is evil.
Actually we HAVE already paid for these assets and do own them. How do you think they were paid for if not from our (or your parents) own taxes and revenues paid to previous governments. And for those who think that privatised power companies are a better way to go, think back to when Contact was floated a decade ago. No individual got more than the minimum shareholding (as will happend again this time, $2k max) and then they became the most expensive retailer - as witnessed by the damage done to them from the whatsmynumber campaign and the debacle over salaries paid to board members. The sad thing is that we have made this mistake before.
Cool. Because someone else paid for them you think you own them. Logic fail.
Show us your ownership papers - and if you don't want to sell them, just don't..
Ownership papers, sure... most of us just call them IR3s and IR4s.
If as per your argument, we the tax payer don't own state assets and all the other things we pay taxes for then I by the same argument we cant be held liable for their upkeep.
So I guess according to you we can just stop paying taxes as well? After all why should anyone be expected to pay the mortgage on someone else's property? Kindly inform the IRD of that stance and see how far you get.
We are not "liable for their upkeep". We are merely feudal slaves to the bureaucracy as you may have noticed - though you seem hopelessly confused.
New Zealanders need to take more ownership of their future and the future of the country. We Mums and Dads are not big on investing into the productive sector of our country rather bur rental properties that do less for the rising generation. We more often want others, like the Government to do it for us, we take little risk and little commitment to the outcomes. Toughen up NZers, I'll put my $1000 dollars in and trust that the capital released will flow in the education sector so my grand kid will be prepared to meet the demands of a technological world
After watching billions of dollars disappearing after being invested in the private sector what do you expect?
Toughen up? Ask the folks who lost all their money what that means. I'm sure they will readily inform you something along the lines of sex and travel.
Anonymous #13 (middle para)... no you are talking, are we Governed by a Government or a corporation? that is the question.
The way to make the partial sale of power co. affordable for mum n dad would be to cancel the power co. tax scam. i.e. the ets. The scam that key said was a hoax. As ironical as it may seem
I will be getting some of these shares, in there like swim wear. If you don't want them that's great, more for the rest of us.
You and me both - BUT if my granny cant afford to put a heater on in the next few years and I find that a bunch of privileged troughers are rorting the game I can promise shonkey and his mates I'll be happy to have more than a few words next time I'm in Hawaii.
NZ is screwed
Suppose a Red-Green government is elected eventually. Would you rather own shares or property?
(Here's a clue: check what happened to property values vs the share market during the last Lefty government.)
2 sides to foreign ownership. If it means an injection of foreign capital into businesses which in turn would create jobs and other benefits for kiwis, then I'm all for it. New Zealand does not have the money nor the population to support this, it would help in the turning around and growing of the economy.
That said I believe a majority stake should still be owned by the government so as to act as a watchdog and ensure that by their majority vote, kiwis interests are not compromised.
I again refer to the near tragic loss of our national airline thanks to its privatized owner Brierley Investments, and their grave mismanagement. A company that was only interested In sucking the airline dry with no reinvestment nor concern for their employees. The long term viability of the airline and it's stakeholders was not in their slightest interests.
This is the ugly side to privatization if left un-checked. It's a fact it's happened before. If we do it again, let's get it right.
Its interesting how, "we" want to keep "our" land and assets, want to have a better life than in Oz, have better infrastructure and roads, have a world class education system, all on an economy that has reliance on a single sector being agriculture and predominately dairy and inbound tourism.
How are we supposed to fund this utopian country with a small number of ever global citizens, a high proportion of beneficiaries (including payments to students) and a tax take that is well below forecast, as a result of no businesses making decent money. Our only focus is housing, not supporting growth.
WIthout these sales, we will borrow more, and fast become Fiji. We are only about 3mth from that happening. In NZ, the patients are running the hospital already - minority view is more important that the majority here.
How are overseas interests going to control these companies when the Govt will retain 51% and legislate that they can not have less that 51% and constitute that they have control of the board room for NZers? Look at Air NZ, its running this model now - is Air NZ Singapore Airlines? NO, but Singapore is a shareholder. Its a great model to use. THis model allowed NZ to have one of the best airlines in the world (and yes I have flown a majority of them on a very regular basis so can state this from my experience not PR) that we should be proud of. Its inefficiencies have gone from 100% state control, and the overzealous cash stripping from private interests are not there as well - a balance that is needed for key assets while providing shareholder funds and sound returns for investors.
Our greatest export isn't dairy, meat or any fibre, its our country men that are leaving to be able to make money for their families while the remaining argue over assets that will be retained on the Gvt Balance Sheet and will have effective control.
Without someone making the hard decisions and not being deluded about where NZ place in the world is (i.e. Helen Clark when she was in power) and getting some sort of order going NZ will be bankrupt, with little choice but to sell all its assets to fund its ever increasing beneficiary payments (of all Pension, DPB, Students, Working with Families etc). We are told that companies like Fonterra should list on the stock exchange to improve NZ life so why not for electricity suppliers etc?
"WIthout these sales, we will borrow more, and fast become Fiji." usually it is Greece that is referenced, but this is the same specious rhetoric that Key has been espousing to batter the gulible into following his plan to make money through the sell-off process. It is the selling process which is where the profit is going - to the sort of people Key is used to working with.
If we all followed this same mantra then anyone with a mortgage should sell their house and rent so as not to have debt, and would then spend the released capital for unspecified purposes. It''s also called - going backwards.
Proving the financial literacy of middle NZ is a joke. Elec price rise of 4% eats dividend on $2K of shares for avg Kiwi family.
All the more reason to buy power shares.
Care to explain N#43 ???
OK JOHN!
WE'RE BRINGING IT ON!
HOW'S THIS FOR STARTERS?
http://www.stuff.co.nz/sunday-star-times/latest-edition/7324518/Hardline-Key-to-rivals-Bring-it-on
http://www.stuff.co.nz/national/politics/7325745/Labour-Greens-hit-out-at-asset-share-plans
http://www.facebook.com/photo.php?fbid=449902035041507&set=a.449901508374893.101410.100000651420214&type=3&theater
http://www.facebook.com/media/set/?set=a.449901508374893.101410.100000651420214&type=3
http://www.youtube.com/watch?v=C94ay_JIhdY&feature=youtu.be
http://www.youtube.com/watch?v=-3KaDMWYyFE&feature=youtu.be
Penny Bright
'Anti-corruption campaigner'
What a lot of you disciples of the high priests of greed don't seem to understand is these assets aren't just any assets, these power companies are what brings the country wealth, fundamentally creating the ability to earn and maintain a standard of living, who ever controls these companies controls New Zealand.
The Government will always control these companies. So what is your problem?
The problem is 49% of Mighty Rivers' dividend will go to private shareholders, rather than the government. If the government gets less income, something will have to be cut to make up the difference, or taxes will rise to compensate.
Don't be so tediously dumb. If the Government sells them it gets capital which compensates for the sold income stream.
If you think it is selling them too cheaply, buy them and make your fortune.
Alternatively, just stop worrying about stuff you plainly don't understand.
I wonder how many people will borrow money to buy shares...
The Government isn't a government anymore, it's a corporation in the business of making money from consumers who have no choice. Government control is now a worry, people control (remember they paid for it in the first place) has been lost because of the evil, I say evil SOE model. If these polys want to be real businessmen then what are they doing in Government? in fact they hate Government... go back to the farm at Dipton I say. This is all being decided thanks to votes from a weirdo in Epson who has admitted only ever watching 10 movies in his life and a parody of a lightweight male lead in a pedestrian 80s pommy sitcom (Peter Dunne) who has made a living out of smashing the poor old weed smoker while supporting big alcohol and big tobacco to preserve his salary for three decades.... welcome to the mandate New Zealand.
The "problem"IS the Gov and we nzers ALREADY control and own these comanies run on good buss basis giving us a very good income.That is why we do NOT wish to share our profits with "OTHER" shareholders who are just anybody on the stockmarket, esoecially since these shares will be sold on Austalian stocmarket and sold to anybody later.
Looking at it from another angle,it will be good for all MaD investors to have another worthwhile investment avenue in a market that is sadly lacking in alternative investments.
liberte
What a weird stream off argument.
Why do you think Australia owns so much of NZ? It's because Ozzies buy shares, not property.
Why do you think houses in NZ are so expensive? Because everyone is buying them, so pushing the prices up.
If we all bought shares, their price would go up, and we'd all be better off. And yes, I have shares in Ozzie companies, like ANZ, BNZ, Transfield and BHP- not much, but enough to be comfortable. And their value is increasing.
Let me digress from the "heavy" stuff. I do not want to be categorised as a "mum n dad" investor. I am a potential investor but my social status is my business and I find Key, yet again, patronising.