The price of shares in Mighty River Power IPO has been set at $2.50.
This is good news for those of us who elected to invest in the company as it is towards the cheaper end of the initially indicated price range of $2.35 - $2.80. The lower the price the more shares investors in the IPO get.
New Zealanders who pre-registered and successfully applied and paid for up to $15,000 of shares will get all they asked for (subject to rounding). If you have made an application you can confirm your allocation by going to www.mightyrivershares.govt.nz or calling 0800 90 30 90 anytime from 9am Friday 10 May.
Should you wish to increase your allocation to your desired level, ie buy more, please let us know by calling 0800 867 323 and we will be happy to assist. Trading is expected to commence at 12:30pm Friday 10 May.
But Labour and the Greens have cost Kiwi's Money
Irrespective of ones views on whether the partial sale of state assets is a good idea or not, the fact is that the Government was going ahead with the sale of Mighty River Power, when statements from Labour Party leader, David Shearer and Greens Party leader, Russell Gordon scared off some potential investors and reduced demand for the shares.
There was nothing to stop the opposition from holding their tongues until after the Mighty River Power float was completed before outlining their plans to reform the power industry by creating a single body to purchase electricity which would then be on-sold to competing retailers. The effect on the price of Mighty River Power would likely have been similar but those paying the price would have been the small minority who initially paid the higher price for the shares and then elected to sell. The vast majority of Kiwi's would have been better off.
It is impossible to say how much higher the shares would have been priced at had Shearer and Gordon waited till after the float had finished to make their statements. The fact is that the cost to those New Zealanders who chose not to apply was $6.86 million for every cent the price was reduced by.
The Government sold 686 million shares in Mighty River Power. At $2.50 it has raised $1.715 billion, had the shares been priced at $2.80 the Government would have received $205 million more.
Prior to statements from the opposition Labour and Greens Party leaders it was widely expected that the shares would be priced closer to the upper end of the range. One of my fears was that the price might have been set higher than $2.80, when Contact Energy was floated it was priced 5 cents higher than the initially indicated range.
Originally more than 400,000 people pre-registered an interest in the offer, many prior to the opposition parties statements. In the end only about 113,000 people elected to invest. It is very clear that demand for Mighty River Power shares was less than it would have been had the opposition party leaders not released their statements, it is equally clear that the share price has come out lower than it would have otherwise.
So investors in Mighty River Power should be thanking Labour and the Greens for reducing the price thereby increasing the return we are likely to get.
As part of weighing up the Mighty River Power investment opportunity wise investors took into account many, many factors including the fact that a change in Government was possible and that the policies of a different Government may have had an adverse effect on the prospects of the company. Few sophisticated investors would have withdrawn their applications post the comments.
It seems that Labour and Greens supporters think that there has been some sort of an opposition victory. A victory that has been won at the expense of the very people these parties claim to represent. Unfortunately it appears from public reaction that few of the population realise what has just happened.
If Shearer and Gordon did realise the likely impact of their statements, how do they justify costing the country so much money for a few political points with their supporters? Perhaps even worse, if they didn't realise the impact of their statements, New Zealanders should be very scared if people with so little common sense get into power.
But what do I know? Both leaders appear to have benefitted in the polls subsequently and I suppose politicians have to be elected first before they can do anything, it would appear no matter what the cost..
The above is my personal opinion only. It may not reflect the opinions of my colleagues - Andrew Parkinson.
- Last updated on .