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.
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