It's time to reconvene the Capital Markets Taskforce and have a clear look at whether more state assets can be primed for partial privatisation through the mixed-ownership model (MOM) and beef up liquidity at the NZX.
At issue is whether New Zealand's capital markets framework is up to scratch in a fast-changing environment disrupted by multiple factors from increasing use of private equity to fund companies rather than IPOs; FinTech disruption and the growth of private savings pools which face decreasing investment options on the stock exchange.
At last year's Infinz Awards the late Rob Cameron — who chaired the taskforce — said there has been such a structural change in the NZ capital markets since its report was presented that it might be time to have another look at the framework.
Cameron died earlier this year. But he was passionate about the need to ensure the New Zealand capital markets remained responsive to change.
Partial floats of central or local Government-owned companies would not only release capital to be redeployed for investment in new infrastructure but it would also result in more listed stocks and provide a home for the growing pool of New Zealand savings.
There are a number of high quality assets in this camp. The previous National Government sold down its 100 per cent holdings in Mercury (then named Mighty River Power), Meridian Energy and Genesis Energy in a series of Initial Public Offerings on the NZX over a two-year period beginning in 2013.
A feature of the partial privatisations was that the Crown would retain at least 51 per cent of the shares under a MOM.
Then Mighty River Power was the first NZ SOE to be privatised (if only partially) in over a decade when 51 per cent of its shares were offered to the market in May 2013.
Meridian Energy followed in November 2013. Genesis Energy (said to be named after a rock band) was the last SOE to be floated in April 2014.
The proceeds from the three IPOs, and that of a further sell down of Air New Zealand shares, went into the Future Investment Fund to recycle capital to invest in various infrastructures.
The three gentailers are now among the largest listed stocks on the NZX by market capitalisation.
At May 11, the market cap of Meridian Energy was $7.59 billion — a significant increase in the $6.5b value the Treasury put on the asset in August 2013. Mercury's market cap was $4.38b and Genesis Energy $2.43b.
Kiwi investors have been rocked by major issues at Fletcher Building, which faces huge problems with a raft of high-profile projects that have incurred huge losses; Fonterra which has had to take a significant haircut in the wake of its abysmally performing investment in Chinese infant formula company Beingmate, and, CBL.
In all three cases, concerns have been raised about the governance abilities of top directors — particularly when it comes to assessing and managing risk.
But market participants spoken to by the Herald suggested New Zealand still looks great compared to many other investing jurisdictions.
The partial privatisation programme had put New Zealand on the map four years ago.
The listing of Fonterra's Shareholder Fund also added depth to the market, and the outstanding success of A2 milk was a plus.
International investors had got to know New Zealand well. But there was frustration at the lack of exposure to sectors this country does well such as tourism and food — and the lack of new stocks.