Brent Sheather assesses the case for asset sales in today’s Herald. He cuts through the crap and concludes “selling the SOEs doesn’t look all that clever, particularly from the perspective of young people and those other sectors of society who won’t be able to participate in the offers in any material way. This is likely to be at least half the population.” He looks at who really benefits, and it’s the fortunate few once again.
On the economics, Sheather writes:
the Government is proposing to sell assets producing returns of at least 6 to 7 per cent a year after tax plus growth, when it could issue debt costing just 4 to 4.4 per cent. On the face of it, this doesn’t look particularly bright, does it?
On who benefits:
But don’t expect too much negative comment, because many people stand to benefit from these transactions. The management and/or directors of the privatised companies will be looking for share options that will massively reward them if the companies do well. Investment bankers, brokers, solicitors and financial advisers will all get to clip the ticket as the initial transactions occur, and then have another go when Mum and Dad ultimately sell their shares.
That’s if Mum and Dad get any to sell – and on this Sheather says:
Then there is the issue of who the assets will be sold to. I remember not being able to get anywhere near enough Auckland Airport shares for my retail clients. However, one wealthy client who also dealt with a major American stock-broking firm that didn’t even have an office in New Zealand was able to get 100,000 shares through the US firm. So not only was Auckland Airport sold cheaply but, to make matters worse, it appears overseas brokers got large allocations of stock and many New Zealand retail investors missed out.
Once again the best political reporting is buried in the back of the Business pages.