The Government's partial privatisation programme is under further pressure, with the Mighty River Power share price dropping sharply to well below the NZ$2.50 the shares were sold to the public for little more than two weeks ago.
The whole sharemarket is down today, reflecting a state of nervousness that is seeing markets drop throughout Asia and Australia due to a variety of poor economic indicators. A short while ago the NZX 50 Index, which measures the performance of the top 50 stocks, was down over 1% today.
The Mighty River did somewhat worse than that, down 4.5% to NZ$2.36.
For "ma and pa" investors who contributed the minimum NZ$2000 in the Government's NZ$1.7 billion sell-off of 49% of the company, this represents a book loss of well over NZ$100. And remember, if you wanted to sell the stocks today you would lose more than that because you would have to pay brokers' fees.
At today's market price the 49% of MRP the Government sold is worth around NZ$100 million less than the Government got.
While any rational investor will tell you that markets and stocks will have good days and bad days and knee-jerk reactions should be avoided, it is nevertheless a bad look for the Government that the MRP shares have dropped as much as 5.5% below their float price just 17 days after listing.
From the Government perspective, it was vital that the MRP shares got off to a good start - not just for the sake of MRP - but for how this would look for the rest of the partial privatisation programme.
In the recent Budget the Government committed itself to preparation for a 49% sale later this year of Meridian Energy. That's much bigger than MRP and could, in the right conditions, raise as much as NZ$3.2 billion.
But it is interesting to note that there was an out-clause in the announcement of the Meridian float. Specifically, the Government said: "Ministers have instructed Treasury to ready Meridian for a share offer of up to 49 per cent of the company, in the second half of this year, depending on market conditions."
The italics are mine. Yes, the Government has given itself an out if market conditions are looking iffy. And suddenly they are.
But even without the nervousness we are now seeing in equity markets, the MRP sell-off has to be viewed as a massive flop.
The Government tried to big it up as a great success that there were 113,000 investors. But that was against 440,000 people who had pre-registered interest in buying the shares, meaning that three out of every four would-be share buyers never fronted up in the end. The Contact Energy privatisation in 1999, which was smaller in terms of the shares offered to the public, attracted 225,000 investors.
And then there were the Greens revealing last week that of the 26.9% of MRP shares sold to retail investors, over half of them went to just 13,000 investors.
Right now it is looking distinctly suicidal for the Government to press ahead with a Meridian sale, even if the Goverment does try to sell it in two blocks as has been suggested previously and was stated openly today as an option by the Prime Minister.
But the Government is in a bind. It has to get its NZ$5-7 billion of targeted returns from SOE sales in order to achieve its wafer-thin surplus in 2014-15. Well, the Government doesn't put it that way, of course. But if it can't find the NZ$5-7 billion from the asset sales that it has committed to capital expenditure on new assets then it either has to shelve the new assets or borrow money and then, bingo, there goes the surplus.
This observer is increasingly prepared to bet that the Government's got another option - an early election.
Prime Minister John Key already has the look of a man on the election trail. His workload getting out and about the country at the moment is astounding.
Last night's TV One Colmar Brunton opinion poll was extraordinarily good news for the Government, showing that National, with 49% could govern alone.
What price an election later this year?
That way the Government can put the Meridian sale on hold and it doesn't have to stick to those recent Budget projections. Win an election later this year and all bets would be off.
There must be some people somewhere at least thinking about it.
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