By Bernard Hickey
Opponents such as me may not like it, but the government did win the election and a mandate for its 'Mixed Ownership Model' (MOM) for partial sale of state owned assets.
So the focus should now be on ensuring the MOM achieves its one legitimate goal, which is broadening and deepening investor involvement in the stock market.
These floats have to be 'Goldilocks' floats, which are not too hot and not too cold.
Getting the price right
If the price rises too much from the Initial Public Offering (float) price then the government will be accused of leaving too much on the table for profiteers 'stagging' the issue.
If the price doesn't rise at all from the IPO price then the government will be accused of leaving nothing on the table and strangling the floats at birth.
Making sure the first float (most likely to be Mighty River Power) hits the Goldilocks target will be crucial in ensuring the floats of the following three energy companies (Genesis Energy, Meridian, and Solid Energy) over 2013 and 2014 are successful too.
The investment bankers will have to earn their no doubt substantial fees by recommending a price that is just right for investors.
Attracting the right investors
The shares sold in the floats also need to be spread around in the right way. If they are pitched and sold too widely there is a risk people are buying shares they don't understand and can't afford. That would ultimately undermine the success of the four floats, both financially and politically.
People already deep in mortgage or personal debt should not be considering buying these shares and any promotional process will have to make that clear, particularly if the floats are being opened up directly to investors, rather than indirectly through brokers, where some element of financial advice would be included.
The Financial Markets Authority may have some interesting challenges if the government pushes the shares too widely and inappropriately.
But if the floats are pitched too narrowly to only clients of brokers and professional investors then they would fail to achieve the government's aim of widening New Zealand's 'ownership' society and would open the government up to accusations it favoured its rich mates.
To sell NZ$5-7 billion worth of shares and to deepen New Zealand's savings culture and stock market the floats will need to introduce a new generation of investors to stocks and convince some hardened sceptics that it's safe to get back in the water.
The floats are a great opportunity to put 'training wheels' on the stock investing bike so investors can eventually get involved again in a broader and deeper way, including buying shares in other smaller, riskier, privately-owned companies.
These MOM floats will be of established, profitable and growing companies that can be explained to a broad population of potential investors, many of whom will be customers of these companies too.
The guinea pig
The first off the block is likely to be Mighty River Power, which I like to call the 'Trip to Taupo' power company.
It owns all the hydro dams on the Waikato River and the geothermal plants near Wairakei. It sees its future growing both the output of geothermal power and the technology around it. It is also investing in this renewable and carbon free form of power generation in America, Germany and Chile.
Mighty River Power generated a Total Shareholder Return (which includes both dividends and asset revaluations) of 11.4% of shareholder funds in 2010/11, which was up from 7.5% the previous year. Mighty River has generated a Total Shareholder Return of 15% per annum compounded since 2007. Hopefully the prospectus will include more information that a wide swathe of New Zealand investors can understand and use.
And let's hope the price of Mighty River's MOM is the goldilocks price. Not to hot and not too cold.