- Date published:
1:43 pm, February 4th, 2017 - 93 comments
Categories: capitalism, national, same old national, Steven Joyce, the praiseworthy and the pitiful, you couldn't make this shit up - Tags: Iain Lees-Galloway, matt nippert, peter thiel
Remember Peter Thiel? Who was granted citizenship in New Zealand by this Government even though he did not live here and did not spend enough time here? Who claimed that a grant of citizenship would “enable him to represent the country on the international stage and give him greater confidence in mobilising New Zealand’s talented entrepreneurs”. Who said how his company could contribute to the venture capital market in New Zealand?
Seems that rather than contribute to New Zealand’s venture capital market he has made a killing. At the Government’s expense.
From this Morning’s Herald:
A scheme funded by New Zealand taxpayers netted billionaire Peter Thiel tens of millions of dollars while his publicly funded investment partner barely broke even.
The partnering of Thiel’s Valar Ventures and the Government-owned New Zealand Venture Investment Fund (NZVIF) was launched by minister Steven Joyce in March 2012, nine months after Thiel took his oath of citizenship at the New Zealand consulate in Santa Monica.
Joyce said at the time the venture was “part of the Government’s comprehensive business growth agenda”, but a Herald investigation has discovered the arrangement was quietly ended in October when Thiel activated a generous buyback option allowing him and his private partners to claim all profits from the venture by cheaply buying out his public co-investor.
So how good was the deal that National negotiated?
A Wall St analyst told the Weekend Herald the clause left the Government facing a “horrendous risk-return proposition” that had no place in agreements between commercial parties.
“If a professional investor signed this deal, they would be the butt of their colleagues’ jokes all the way out the door,” the analyst said.
“This is a clear ‘heads I double win, tails I lose’, ‘heads the taxpayer loses, and tails the taxpayer loses’ proposition, and a very savvy deal for Thiel.”
This assessment is echoed by Auckland-based Castlepoint Funds partner Stephen Bennie, who said he would leap at the chance to sign up to a deal if a partner offered such a clause.
“You’d take it. And obviously a fairly smart guy did. Thiel didn’t need to be asked twice,” Bennie said.
The guts of the deal is that Thiel put in under $7 million into the deal and the New Zealand Venture Investment Fund put in $9 million. The fund was invested primarily into Xero shares. Then when the price spiked Thiel was able to invoke the buyout clause and pay the NZVIF out essentially at cost. Kaching.
Steven Joyce is trying to blame Labour for this fiasco:
Finance Minister Joyce, who was Minister for Economic Development at the time the Valar partnership was signed and operated, was asked if the buyout option represented a good deal for taxpayers.
“On the face of it, no,” the minister said.
Joyce said he had inherited the settings for the NZVIF, including the buyout clause, and suggested Lees-Galloway direct his criticism elsewhere.
“If he’s got a problem with it — and I don’t argue with him that he should — then he needs to go back and talk to the Labour ministers at the time  who set this up,” Joyce said.
What a joke. What has he been doing for the past 8 years. And his Government signed the deal. They should wear it.
Iain Lees Galloway has summed up the situation in these terms:
This looks like a terrible deal for New Zealand. No one can blame Thiel for seizing an opportunity to make an awful lot of money at very low risk. It’s very easy to look like an amazing investor when you’ve got people like Steven Joyce prepared to give you a sweetheart deal like this.”
Thiel was let in because he was such a generous person and his presence would be so good for New Zealand business. The only result I can see from the decision is we have lost lots of money. Millions.
Turning exotic financial options found buried in footnotes into clickbait would have to rate as one of my proudest achievements. #ThielDeal
— Matt Nippert (@MattNippert) February 4, 2017