On Breakfast just now, Petra Bagust asked John Key what’s so great for the economy about listing our assets on the stockmarket. A good question. The answer was pure lies:
“our companies need capital and they can raise that one of two ways, borrow the money from the bank so that’s debt or they can go out and raise it in the form of equity and that equity stays with the firm permanently and that’s what a share float’s all about”
Not a cent of the money that would be raised from asset sales is to stay with the companies, it’s all going to the Crown.
“So, for New Zealanders potentially branching out and having some shares in some cash and some bonds or whatever is the logical thing to do”
Strange leap there.
“It helps those companies get access to that equity. And they can use that equity to go out there and grow”
Remember, these share floats will not add a cent of equity to the companies Key wants to sell and he knows it.
“So, if you take a company that comes to the market that’s owned by maybe a small group of people, family members whatever they might be, and they only have a certain amount of cash and coming t0 the market allows lots of other investor to put their money in and on a share of hopefully the upside of that company and from there that company can use that money to grow their business.”
That’s the textbook story of floating a company. But it’s not what the Government is doing. It’s not using the float to inject capital in the businesses. In fact, floating will make it harder for the companies to raise money via equity because the Government will be legally required to but 51% of it. And, unlike Key’s example, the current owners aren’t short of cash. If the companies needed more cash, the cheapest way to get it would be a Crown capital injection or they could do what they already do and issue bonds.
Key knows all this. And he just sits there and lies. And, seemingly, no-one who interviews him has enough knowledge to know that he’s lying.