Stock Takes: Mighty River lolly scramble

The numbers pre-registered for the Mighty Power River float suggest it's a serious lolly scramble. Photo / Julia Thorne

The Government's confirmation that Mighty River Power is finally on the block has spurred a rash of activity among brokers.

Both Craigs Investment Partners and Forsyth Barr have reported a boost in inquiries from their existing clients as well as some newbies asking about how they can buy the shares.

One broking firm noted it was getting a few calls from its elderly rural clients wanting them to help pre-register online because they don't have computers at home.

Much has changed since the last major SOE float of Contact Energy in 1999 when pre-registering on the internet would have been unheard of.

More than 151,000 people pre-registered in just the first three days. But Stock Takes can't help wondering if a lot have just signed up because they are concerned they will miss out on something if they don't and haven't actually put much thought into what they are buying yet.

Many details, such as the much talked of bonus scheme, have yet to be revealed so it's hard to know how attractive it will be for the average middle-class punter who is probably debating whether to pay down their mortgage or put the money into Mighty River.

It will be interesting to note what sort of research comes out of the major broking firms over the next few weeks. It seems doubtful that any analysts will be very critical given their firms are either already involved in the Mighty River sell-down or are hopeful of playing a part in the next one.

Two and a half sales
There has been a lot of speculation that the Government might try to push through three partial state-owned asset sales this year.

Expectations are that Meridian Energy will be next off the block in either September or October. As the largest of the SOEs the Government will be keen to get it off its books ahead of election year and while the markets are still on a high.

But some suspect Air New Zealand could jump the queue ahead of Genesis Energy.

Air New Zealand would be quicker and simpler because it is already listed. The Government, which owns just under 75 per cent of the airline, wouldn't have to undertake a full initial public offer process.

Chairman John Palmer recently told the Herald he could sell down the Government's stake to 51 per cent in a day. Stock Takes doesn't doubt this given the recent successes of placement sales in the New Zealand market.

But the challenge then would be giving individual New Zealanders the chance to buy into it.

Air New Zealand has been unpopular in the past with some investors due to the challenges associated with the aviation industry and the cyclical nature of tourism. However, its recent strong result shows management seem to have the company well in hand. The company's share price has rocketed up in the past few weeks after its six months to December 31 net profit rose from $62 million to $100 million - its best half-year profit in five years.

Millionaires factory Macquarie has named Air New Zealand as its highest conviction Kiwi call.

Shares in Air New Zealand have risen 12 per cent so far this year and have returned 76 per cent in the last year.

Air NZ shares closed up 3.5c yesterday at $1.49.

Telly ho
The Accident Compensation Corporation is the first to emerge as a substantial shareholder in pay TV business Sky TV with a 5.087 per cent stake.

The company's shareholder register is expected to be wide open after News Corp's sell-down on Monday of its 43.65 per cent stake.

The $815.3 million placement was oversubscribed and is believed to be the biggest block trade on the NZX in a decade. It certainly had a big impact on the market with the NZX50 index down over 1 per cent on Monday - it's biggest fall in some time.

Sources say the drop was due to fund managers having to sell other stocks to buy into Sky TV, as well as the rebalancing that many managers undertake at the start of the month.

The deal is expected to boost Sky TV into the top 10 largest listed companies on the exchange although the subsequent partial listings of Mighty River Power and Meridian Energy could bump it back out again.

Some market sources say the recent spate of sell-downs which include Steel & Tube, Trade Me and Sky TV could spur others to come to market, with suggested possibilities including Ryman Healthcare, Hallenstein Glasson and Cavalier.

Cashing up
Sir Ron Brierley has sold another parcel of shares in Guinness Peat Group netting close to $3 million and reducing his ownership to just 1.78 per cent.

The former corporate raider who was nearly knocked off the board of GPG last year has been in sell-down mode for the past few months.

In December he also made close to $3 million by selling five million shares. GPG's annual meeting will be held in New Zealand again this year, likely to be around the end of May.

Stock Takes will be interested to note if Sir Ron makes an appearance after his drubbing by the Shareholders Association at last year's meeting.

GPG has made good progress in selling down its assets and has said it will likely change its name to Coats this year to reflect its focus on the thread business. Shares in GPG closed steady on 60c yesterday.

Woopsie
Stock exchange boss Tim Bennett is promising there won't be any more errors like the one experienced by new listing Snakk Media on Wednesday.

Snakk was accidentally put on the main board of the exchange rather than the NZAX - its alternative market which has lower fees and compliance requirements.

The exchange blamed the booboo on a technical fault but it's not a good look for the first listing of the year.

Bennett, who made a personal appearance at the official launch of Snakk on Wednesday, said he didn't know the specifics of what had happened but said the exchange had had no major problems for the past few years and was keen to keep up that track record.

The exchange upgraded its systems last year and will hope there are no outages especially with behemoth Mighty River Power on its way to listing.

The float is expected to attract a lot of first time investors and the last thing the exchange would want to do is put them off buying more shares.

Tasty treat
The NZX error did not appear to have any detrimental impact on Snakk Media which had a cracker of a first day with its shares rising more than 300 per cent on debut.

The company is founded and chaired by Kiwi entrepreneur Derek Handley and helps businesses get their advertising into the new tech world of smartphones and tablets.

As of yesterday morning Snakk had a market capitalisation of just under $60 million, putting it behind Burger Fuel which sits at just under $93 million. However, Snakk gave up a big chunk of its gains from Wednesday and eventually closed down 17c yesterday at 12c.

Snakk is not far behind last year's listing of boutique beer business Moa, which is on the main board of the exchange and has a market cap of $37.3 million. Its shares debuted at $1.29 in November last year but have since fallen below that to $1.24. Moa's shares closed down 2c yesterday at $1.22.

Big plans
The NZAX has not been particularly successful for the stock exchange.

It kicked off in November 2003 with the promise of offering a low-cost lightly regulated market for small to medium sized companies to raise capital.

It started with 11 listings and nearly 10 years later that number has grown to just 22 companies many of which are very thinly traded and are stuck in the penny-dreadful camp.

The NZX has been keen to do something about the small end of the market for some time.

It was on the cards when former chief executive Mark Weldon was still at the helm and new boss Tim Bennett has also been talking about it.

Bennett says the reason for the delay is that its plans require the new Financial Markets Conduct Bill - a total rewrite of securities law - to be passed into law.

"We had expected that to be last year, now it looks like the third quarter," he told Stock Takes this week.

But he hinted that the plans involve better technology to enable more communication between small companies and their shareholders.

"We've got to try and break this vicious cycle around market sensitive data versus communicating with shareholders."

Bennett says that could mean setting up a service which allows information to be sent to shareholders but not made available to the general public.

"If you are a small company it's exactly what you want to do," he says.

"It's what they [Snakk Media] do - blog and tweet - that is how they communicate with customers - why wouldn't they communicate with their shareholders in the same way?"

Stock Takes isn't so convinced that the general public would feel happy about being kept out of the information loop even if it is only non-market sensitive information.