As Mighty River shares slump, PM Key says govt has option of selling Meridian in two blocks rather than all at once if 'digestion' issues become a problem

As Mighty River shares slump, PM Key says govt has option of selling Meridian in two blocks rather than all at once if 'digestion' issues become a problem

Prime Minister John Key has told a post-cabinet news conference the government could choose to stretch out the planned sale of 49% of Meridian Energy in two blocks to avoid giving the market indigestion.

His comments came as Mighty River Power shares slumped 4.5% to a record low of NZ$2.36 and well below the initial public offering price from last month. Concern is growing that the float of Meridian, which is around twice as big as for Mighty River, will struggle to be completed in the second half of this year as previously indicated given falling markets and the tepid demand for the float.

"It's a bigger float so the government is expecting to get in the order of NZ$3 billion for its share," Key said.

"We'll always reserve the right to do that float in chunks if we wanted to," he said.

"We wouldn't have to float 49% in one day. We might choose to do that if that's what the demand was like, but it could always do that in two slices."

Key said retail investors would always have to take up about a third of the shares on offer to make the mathematics of any offer work. 

"If there are digestion issues, in theory that's a possibility," he said, confirming that a staged float was an option the government was actively considering.

Key pointed out that Meridian would be the largest stock on the exchange once floated and the Australian government had sold Telstra in stages, simply because of the size of the offer. 

"The government will reserve the right to sell it in blocks. We could do that in two blocks," Key said.

Elsewhere, Key confirmed the government was in negotiations with the Chinese government about making the renminbi currency directly convertible with the New Zealand dollar, following a move by the Australian government to do the same with the Australian dollar. 

(Updated with more quotes/details)

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15 Comments

life jackets will need to be made compulsory for Meridian float at this rate ...

Bernard, can you find out who is providing advice to Govt. on this now..
 

Henry_Tull, as I have noted over recent weeks this JGB business has to be resolved before any minnow retail stock investor should consider NZ stock market risk  - especially that being offered as a gift from the government.
 
The flow on effects are well documented here, The Fed Squeezes the Shadow-Banking System - copy/paste title into Google to read whole article.

My word is my Bond. A wealth adviser has been wondering if we would like to "become involved"... traded AGBs?
Exchange-traded AGBs offer a convenient and accessible way to invest in Australian Government Bonds.
AGBs are debt securities issued by the Australian Government. Exchange-traded AGBs enable investors to gain beneficial ownership of an AGB in the form of a CHESS Depositary Interest (CDI). Holders of Exchange-traded AGBs obtain all the economic benefits, including payments, attached to legal ownership of the AGB.
AGBs are considered to have the lowest possible credit risk of all debt-based investments being issued by the Australian Government. AGBs are therefore highly suitable as part of an investment portfolio seeking a secure, stable and reliable cash flow.
Due to their low credit risk, Exchange-traded AGBs can also help diversify your portfolio, offsetting the risk of other investments such as shares or property.
 
yes not something for the little man (i.e. us) we thought:
http://www.asx.com.au/products/exchange-traded-australian-government-bon...
http://www.asx.com.au/documents/products/ASX_42301_AGB_Fact_Sheet_WEB.pdf

Sell them at the post office.  So many a week evenly over two years.  Set the price where 95% of them sell each week but there are just a few left.  The price will find a level. Let the real market determine the share price.
Cut out the snake oil salespeople from the Financial services.  And let them go whistle for their fees.
I can't think of anybody who benefits from the current 'float' process other than the financial services industry.  It's certainly not the seller or the buyer.

Cut out the snake oil salespeople... You are asking him to cut his own head off.
Highly unlikely...!
But you are correct when you state who are the only beneficiaries from this deal. Luckily the general public got smarter and backed off, eventhough they were registered to purchase shares.
HGW

Looks like everybody will hang back on Meridian till well after the float, and see how far it sinks..., as it is highly likely that if the shares are as overvalued as MRP they will sink
Looking like a bad time  to sell Meridian, good time for a flip-flop on this one

Yet contact are twice the price? So does that make Contact over-valued? or MRP under-valued?
If you think MRP is bad, well Contact must be awful...
Id be interested in Meridian myself at a similar price to MRP the discount from this "mess" will be factored in....and its a renewable source generator....so its costs v fossil fuels isnt going to take a hammering.
regards
 

Who will review the disclosure and marketing info and sue the Govt for misleading Mum and Dad investors?

Anybody that doesnt act like a grown up I guess.  Plenty of info out there, so as far as Im concerned a mature adult takes responsibility for thier own actions. Of course then there are the greedied who expected to make a short term killing and find they are not.....
Oh and by the way, you are not sueing the Govn, you are sueing yourself.
regards

"We'll always reserve the right to do that float in chunks if we wanted to," he said.
"We wouldn't have to float 49% in one day. We might choose to do that if that's what the demand was like, but it could always do that in two slices."
Seems like a lot of WE's to me. What happened to democracy? The mayority of Kiwis do not want this assets sold, yet they are going on the block anyways so the gob-ernment can show a surplus. This is short term thinking at its best, stupidity at its worst!
"If there are digestion issues, in theory that's a possibility..." Don Key's best!
I read we are going to shove this down the market's gullet, even if we need a bit of Bepto-bismol to sooth the indegestion. What a poiltician... What a man!
HGW
 

Editorial from the Herald... Is the proposition gaining traction...
Not much time has passed since the Government's Budget announcement that shares in Meridian Energy would be the next to be sold. Already, however, it should question the wisdom of that decision and whether a more suitable subject is sitting in its cupboard. Major disappointments with the part-sale of Mighty River Power, including now a share price that has dipped below the float price, have made the task of selling Meridian later this year significantly more difficult. So much so that the Government should put it on the backburner and turn its attention to Air New Zealand.....
 
http://www.nzherald.co.nz/asset-sales/news/article.cfm?c_id=1503277&obje...
 

What is obvious now is that this is an ideal time for selling down the Government's 73.4 per cent stake in Air New Zealand. The airline's earnings are flying high in an industry noted for its volatility and because it is already stock exchange-listed, there will be no need for a prospectus. It will fetch much less than Meridian but would be a far more straightforward proposition for a Government keen to keep the ball rolling.
 
Cripes, my inheritance is already suffering from the losses of the first Air NZ float - what's to say the second will turn out any better.
 
And let's not forget the power companies were not fit for purpose. They were never going to be given the means by which tribute was extracted from the public.
 
Geoff Bertram was at the top of the cliff warning us all - but did Key and Co listen? - no, they had shares in the ambulance outfit waiting at the bottom.
 
A year ago, appearing before the Select Committee considering the Mixed Ownership Bill, I warned that the regulatory risk overhanging the electricity industry had become severe, and that it would be unwise to proceed with any partial share floats without first ensuring that investors could be confident of a stable policy and regulatory environment.

Very constructive thanks

Todays politicians make used-car salesmen appear honest.
Everywhere one looks there is ample evidence of the public wishes.  Does this matters...?  Not one bit, or even a smidgen of a bit! 
They can lie and cheat and then spin it around to make it look like a mistake, and then spin it around again to make it look like is somebody else's fault... and then spin it again ad infinitum.
Have to give them some credit for their Chutzpah! 
HGW