Key thinks small, detailing protections for mum-and-dad investors

The 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:

• A minimum application for Mighty River Power shares set at a modest $1000.
   
• A guarantee that New Zealanders seeking up to $2000 worth of shares will not have their application scaled back.
   
• 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.