Spin-bustin’: new investors scared off MRP

Written By: - Date published: 8:19 am, May 10th, 2013 - 27 comments
Categories: privatisation - Tags:

The Nats’ spin is that ‘mums and dads’ were scared off investing in Mighty River Power by the Green-Labour NZ Power plan to reduce power prices but sophisticated buyers bought in. Look at the evidence: 80,000 of the 113,000 retail investors are new to the stockmarket and they boost stockmarket participation by 20%. Hence there were 400,000 existing Kiwi shareholders, and less than 10% of them bought in.

That tells me that 80,000 suckers were pulled in by the government’s multi-million dollar ad campaign while the vast majority of established shareholders knew well enough to stay away. What, in effect, we saw was a judgement by the market – that a Green-Labour government is coming, it will introduce NZ Power, and that will reduce power prices by taking away the super-profits of Mighty River and the others.

Things to watch in coming days and months:
How much has National underpriced MRP to get a positive story of a bounce on listing? Every cent of rise is nearly $7m in public money that National gave away?
How many ‘mums and dads’ are still there when we get the first annual report figures in October?
How many people will show up to a second or third electricity company float if so few showed up to the best of the bunch?

27 comments on “Spin-bustin’: new investors scared off MRP ”

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  1. Dv 1
    10 May 2013 at 8:34 am

    AND only $25million was withdrawn after the LG announcement.

  2. mickysavage 2
    10 May 2013 at 8:40 am

    Good post James. It is scary that so many investors are newbies. I suspect that between Labour’s and the Green’s plans to stop usurious power charges, Tiwai Point’s likely closure and Treaty issues about water the more canny investors decided to hold off.

    Makes you wonder about Meridian and Genesis though. Tiwai Point could turn these entities into marginal businesses at best.

  3. Pete 3
    10 May 2013 at 8:50 am

    Also bear in mind the next floats. Few non-institutional investors will invest in all of the power companies and most personal investors with any enthusiasm for the process would have blown their wad on Mighty River. Why invest in competing companies?

    • Rich the other 3.1
      10 May 2013 at 9:12 am

      Pete, don’t be silly
      The new investors will cash in on mrp and reinvest in the next offering.
      By the time they are all cashed up and enjoying a better bank balance they will be solid nat voters, brilliant.

      A Win Win situation.

      • framu 3.1.1
        10 May 2013 at 9:31 am

        nice of you to confirm its a big stinking con designed to enrich a small elite, rich – well done

      • One Anonymous Knucklehead 3.1.2
        10 May 2013 at 9:34 am

        they will be solid nat voters

        All 2.85% of them. Meanwhile, the National Party is bleeding votes from people who don’t want their property sold.

        Own goal, genius.

  4. Lanthanide 4
    10 May 2013 at 8:58 am

    “What, in effect, we saw was a judgement by the market – that a Green-Labour government is coming, it will introduce NZ Power, and that will reduce power prices by taking away the super-profits of Mighty River and the others.”

    No, now you’re just making false equivalences, just like National do when they say that everyone who voted for them wants asset sales.

    All we know is that institutional investors didn’t buy in. We don’t know *the* reason why, as you are claiming. Your given reason can also work the opposite way: some investors will think Labour/Greens won’t get into government, and so will have bought more shares because they expect the price to be lower than it otherwise would have been.

    Another reason that I think is important which may have scared off institutional investors is that MRP are projected to pay 107% of next years profits as dividends; eg they’re going to borrow in order to pay dividends. Doesn’t seem like a good move to me.

  5. ianmac 5
    10 May 2013 at 9:06 am

    On Morning Report they were saying to expect the share price to rise today from $2.50 to $2.65. As planned.

  6. Adrian 6
    10 May 2013 at 9:17 am

    Did the institutions hold off if as Carmel Fisher says the real price will be evident in a months time. What’s the bet that they’re going to pick up shares at a snip then from the newbie muppets?.

    • King Kong 6.1
      10 May 2013 at 9:26 am

      These newbie “muppets”, as you call them, at least had the smarts to accumulate enough spare cash to be able to invest in these shares in the first place. A lot more credible than some of the malingerers and beneficiary wasters on here who are giving them shit.

      When you are not clever enough to get a job maybe you should dial back the financial advice.

      • Lanthanide 6.1.1
        10 May 2013 at 9:33 am

        Anyone who bought the shares with the intent to re-sell in the short term will have to pay income tax on them.

        Be interesting to see how many of these first-time investors know that.

        • Cant remember my last username 6.1.1.1
          10 May 2013 at 10:13 am

          Theoretically yes, but in reality highly highly unlikely

          • Lightly 6.1.1.1.1
            10 May 2013 at 11:14 am

            IRD’s said that they will be watching them. wonder if govt has given IRD the deets of retail investors

      • Murray Olsen 6.1.2
        10 May 2013 at 2:37 pm

        I’ve got a job. I’ve got spare cash. The only financial advice I have for anyone is to not buy stolen goods. My knuckles don’t drag on the ground.

      • Adrian 6.1.3
        11 May 2013 at 10:10 am

        I was quoting Carmel Fisher boofhead. She’s not buying for a while, and I’ll take my financial advice from her. Not some Aaron Gilmore wannabe with a third K missing.

    • mikesh 6.2
      10 May 2013 at 9:48 am

      I expect the “newbies” will hold for two years in order to obtain the bonus issue.

  7. Rich the other 7
    10 May 2013 at 9:31 am

    Happy days,

    Looks like $2.80 for mrp.

    (ps) I didn’t buy any I but enjoy seeing success.
    go the nats.

    • Lanthanide 7.1
      10 May 2013 at 9:34 am

      “(ps) I didn’t buy any I but enjoy seeing success.
      go the nats.”

      Rooting for the wrong team, then.

      • framu 7.1.1
        10 May 2013 at 9:38 am

        and just to be pedantic

        “go the (insert noun)” – has got to be one of the worst uses of the english language ive seen in a long time.

        I know it really common, but its almost text speak

        • ianmac 7.1.1.1
          10 May 2013 at 9:55 am

          How about ive (ivy?) instead of I’ve framu? 🙂

          • mac1 7.1.1.1.1
            10 May 2013 at 10:21 am

            ianmac, ‘Quis pedat ipsos pedantes’?

            Seriously though, the comment from Rich the other about success demands a reply as to the nature of success. At the personal level, an investor of $8000 at $2.50 a share gets 3200 shares which if they rise by 30 cents gives an immediate profit of $960.

            At the level of society, half a social asset has been sold for $1.8 billion to give tax breaks to the already rich with the effect of reducing government revenue from MRP returns of, is it, some $200 per annum which means that in nine years the loss of revenue will have equalled the sale price? Who will be affected by the loss of annual revenue but those who still pay taxes or who will lose governmental services and support?

            Not my idea of success.

          • framu 7.1.1.1.2
            10 May 2013 at 10:31 am

            ha ha – fair enough 🙂 (you should of seen how i first typed pedantic)

            and lets not mention the missing “‘s” from “it’s”

  8. Financially literate 8
    10 May 2013 at 7:55 pm

    ‘How much has National underpriced MRP to get a positive story of a bounce on listing? Every cent of rise is nearly $7m in public money that National gave away?’

    Every cent rise increases the government’s equity. Something the left seemingly wishes to decrease at every opportunity. Short-sighted.

    • locus 8.1
      11 May 2013 at 10:31 am

      My chook lays 2 eggs a day. You can own half my chook if you pay me 100 eggs. After 200 days i’m losing out.

      But according to your logic, if somebody offers you 120 eggs for your half of the chook, that means my half of the chook is worth 120 eggs. Oh goody i now know i’ll only be losing out after….. 200 days

  9. Financially literate 9
    12 May 2013 at 8:59 am

    MRP has been sold down. It always was going to be. Get over it. 120 is better than 100 which again is better than 80. Pity the bed wetters are hell bent on talking Crown equity down for short term political gain.

    • Ross 9.1
      12 May 2013 at 9:15 pm

      What did Treasury say about the deficit? That’s right, it’s expected to grow by $100 million following the loss of revenue from MRP.