Learning about shares: Pitching for sponsor's dollar

In the second of a six-part series, Olympic champion and first-time investor BARBARA KENDALL provides some insights with the help of the NZ Exchange


There's been quite a bit in the papers recently about companies "going to the market to raise development capital".

It struck me that I've been doing that all my sporting life by getting the support of sponsors.

I remember the first time I looked for sponsors seriously. It was 1988 and I was young, hungry and still four years away from my first Olympic success.

I knew that to get to Olympic standard I needed money to compete regularly on the international circuit against the best in the world. So just like I've done many times since then, I went to the market and pitched my dream, my track record and myself.

I had my fair share of knockbacks, but I wouldn't take "no" for an answer. When TVNZ came on board as one of my first sponsors, they said it was my blind determination that swayed them to support someone in a non-televised sport, three years out from the Olympics.

Now that I'm learning about the sharemarket, I can see strong similarities between being a sponsored athlete and a listed company.

There's the financial parallel - sponsors and the sharemarket are sources of funding to help athletes and companies achieve their potential. But there's also a deeper connection that comes from having a personal stake in an investment.

When I was young and largely unproven, my sponsors' support came down to them believing in the story I was telling enough to want to be part of it themselves.

When they invested their money in my campaign, my personal dream became a shared mission that I was undertaking on behalf of us all.

It must be the same for investors in the sharemarket.

I know that when I eventually make a decision to buy a stake in a listed company, I'll need to be convinced of their "story".

The kinds of questions I'll be asking are the same ones that my sponsors have always asked me. What are the company's goals? Do they have what it takes to pull it off? Will there be a big enough reward when they achieve their goals to make my investment worthwhile?

The purely financial aspects of the answers will be very important in any decision I make. But I'll be looking for a company that also answers my questions in a way that makes me think they're doing something that I want to be a part of - just like a great case for sponsorship does.

That's one reason why I'm interested in finding out more about the New Zealand sharemarket. I'd like to own a piece of the companies that will build the New Zealand that my daughter Samantha grows up in.

So my question is: how does an investment in an NZX-listed company relate to the New Zealand economy?


Dan Dividend responds: You've made an interesting link between life as a professional athlete and the life of a listed company.

If New Zealand companies were athletes, the New Zealand stock market would be the major sponsor.

By providing companies access to capital, the stock market is one of the most important factors driving the New Zealand economy.

This is just like sponsors' money allowing athletes to compete at the highest level. The difference is that investing in a company listed with NZX is a more directly financially profitable undertaking than sponsoring an athlete - you get to share the profits when your "athlete" is winning.

The New Zealand stock market helps the stars of our economy to flourish.

Just as sponsors' support has helped New Zealand become one of the world's top performing sports nations per capita, capital raised on NZX's markets helps the stars of our economy grow. In the 10 years since 1993, New Zealand-listed companies have raised over $30 billion on the New Zealand stock market.

For example, over the past year Fletcher Building has raised over $100 million on the NZSX Market which has been used to buy Tasman Building Products and enhance their position in Australia, among other things.

In the same period Fletcher Building shares have returned investors a gross return of 30 per cent.

Like Barbara, our sharemarket is an international star. Since she won her first Olympic medal in 1992, the New Zealand stock market returned, on average, 12.4 per cent annually. Barbara has had a remarkable career since 1988, as has the New Zealand stock market.

The stock market has also been a leading performer among global sharemarkets over the past five years - returning an average of 10.02 per cent per year.

Back the stars of the future, but hedge your bets.

Just like the risk taken by Barbara's first sponsors, backing an unproven growth stock can be a risky business.

There are great potential rewards if the company is successful, but the price of that potential is generally a bigger-than-usual risk that the company won't succeed.

Because of this, it's important to hedge your risk by holding a diversified portfolio of investments, including growth stocks and shares in proven companies with more guaranteed income streams.

* Tomorrow: is the stock market too risky?

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