As expected, Bill English has tried to put the best possible gloss on the sale of Mighty River Power shares.
The result had been outstanding, fulfilling the Government's commitment to ensure at least 85 to 90 per cent of the company was in New Zealand ownership, the Finance Minister said. But by most yardsticks the float was a serious disappointment. It failed, in particular, to advance the concept of a shareholding democracy in which, as is common in Britain and Australia, a large number of mum-and-dad investors own stakes in and enjoy steady long-term results from fully or partly privatised utility companies.
Only 113,000 of the 440,000 New Zealanders who pre-registered their interest ended up buying shares. That is just over half the number who bought shares in Contact Energy when it was floated in 1999. The Treasury had forecast a similar uptake of Mighty River shares. The failure to achieve this meant, as Labour Party leader David Shearer noted, that only 2.5 per cent of the population invested in Mighty River.
Mr English suggested this was a consequence of mum-and-dad investors being scared off by Labour and the Greens' announcement early in the sale process that they would set up a single buyer to purchase all electricity generation. Only more sophisticated investors had the skills and interest to calculate the risks, he said.
Some mums and dads would certainly have been put off by the opposition parties' policy, as well as doubts about the future of the Tiwai Point smelter. But a breakdown of those who bought shares paints a different picture to that advanced by Mr English.
Of the 113,000 individuals who bought shares, 78,000 did not hold a common shareholder number. That indicates they are new to sharemarket investment. And that many of the stay-aways were more experienced investors who did not like what they saw when they calculated the risks. The high proportion of new investors does, of course, have a silver lining, and the stock exchange will be hopeful they gain a taste for the sharemarket and add other holdings.
Naturally enough, the Government was keen to put the entire blame for what happened on "politicking" by Labour and the Greens. But their policy had only a subdued impact on the final share price. The bookbuild process, when large investors submitted bids for the shares, resulted in this being set at a mid-range $2.50. That will have encouraged the Government to believe it can proceed with some confidence with the part-sales of Meridian Energy and Genesis Power.
This is desirable if only to ensure they share the same ownership model and are subjected to the same disciplines as Mighty River.
The ill-judged policy of Labour and the Greens will continue to hover over these two floats, which are expected before the end of the year. The Government hopes its impact will lessen over time, but some potential investors will continue to be deterred. The Government does, however, have good reason to hope Meridian will strike a new supply contract with Tiwai Point's owner, Pacific Aluminium. Successful negotiations would remove a factor that concerned some investors long before the opposition parties' hasty announcement.
The prospect of steady long-term returns would be much enhanced.
Hopefully, there will be a greater uptake when Meridian and Genesis are floated. The concept of a shareholding democracy is not just about the benefit to mum-and-dad investors. It is about remedying an unhealthy and unproductive investment emphasis on the housing market.
The Government needs to argue the case for the sales a whole lot better than it has.