John Key has this weird defence when challenged over the number of Kiwis who will buy and retain shares in his asset sales, given that shareholders in Contact have plummeted from 225,000 at point of listing to 78,000 now. He cites a single article by a single journalist that says Contact is widely-held. Yesterday, Key quoted at length from the year-old article. And walked straight into David Shearer’s trap.
David Shearer: Is he aware that the number of Contact Energy shareholders has reduced from 225,000 to just 78,000 since its sale, and that now just 0.03 percent of shareholders—that is, about 20—own 75 percent of the shares; and why did he say last night that those retail investors who bought shares when it was sold for the most part held on to their shares?
Rt Hon JOHN KEY: I have great news for the member. Fifty-one percent of all shares in the mixed-ownership model will be held by one investor, which is called the New Zealand Government, so it is a vastly different proposition. Secondly, the retail component involved people directly buying relatively small parcels, and there was some slight consolidation of the very small parcels some years on. For the purpose of the member’s education, let me read from Pattrick Smellie: “One of the least defensible criticisms of the Key Government’s partial privatisation plans have been regular references to Contact Energy as an example of a privatised company which lost control to foreigners. Yet nothing could be further from the truth. The reality of the Contact share register is it remains possibly the most widely held share by domestic New Zealand investors, 11 years on from the float. In fact, Contact’s shareholders have shown a high degree of loyalty to the Company, to the extent that EME’s attempts to take 100% were roundly rebuffed in the early 2000s. What it shows is that many small-scale investors have piled into privatised companies …” [Speaker tells Key to sit down and stop endlessly quoting an old newspaper article]
David Shearer: Is this the same Pattrick Smellie who worked as a public relations consultant for Contact Energy?
Rt Hon JOHN KEY: I do not know that, but now, I think, he works for Fairfax…
And, then, Shearer tagged out and in came Russel Norman:
Dr Russel Norman: Given that Treasury documents show that only about 7 percent of New Zealanders are expected to buy shares in these companies, does he think it is more likely to be the 7 percent who got massive tax cuts under his Government, the 7 percent with zero or negative net wealth, or the 7 percent who are unemployed under his Government?
Rt Hon JOHN KEY: [long pause as Key realises none of his lines address this argument] Within the rules that govern the Financial Markets Authority legislation, let me say that the Government is moving ahead with the mixed-ownership model, which will present opportunities for all New Zealanders, if they wish to, to purchase those shares. There are 1.8 million KiwiSaver accounts, which currently hold $12 billion worth of investments. What that member is saying to those 1.8 million KiwiSaver account holders with the $12 billion is that they should go to Australia and buy shares in its energy companies. If the member took just one moment to go and have a look at the share registry owned by the New Zealand Superannuation Fund he would see that they own pretty much most of the listed electricity companies and energy companies in Australia. I, for one, personally would rather see them investing in New Zealand than in Australia. If the member has a different view, well, he is welcome to go and put that to New Zealanders.
Of course, none of this stopped Key turning around and telling journalists that he thought the typical family (which he thinks is on an income of $90,000 – knock $20,000 off that, sunshine) would be able to afford to buy 5 $1,000 parcels of shares in companies that they already own.
Key has committed himself no to a situation where he has promised that not just a couple hundred thousand but more like a million people will buy shares.
If he doesn’t deliver in the Mighty River float – if most middle-class households end up losing their shares because they can’t afford to fork over thousands of dollars for what they already own, then this asset sales programme, and Key’s popularity, will be down the gurgler.