Peter Sherwin, Grant Thornton New Zealand Partner, Privately Held Business, looks at the ramifications of the Mighty River Power asset sale which closes today.
With applications for Mighty River Power (MRP) closing at 5pm today, a straw poll around the office indicates that the uptake on MRP shares will be lower than the Government first planned.
And if this comes true the sabre rattling by the Greens and Labour may have wiped as much as $400m off the value of the MRP listing by damping the enthusiasm of small investors.
Potential investors may now hold back due to confusion about the future of the power industry, uncertainty whether MRP will stay at a higher price and a fear the price will go down upon listing.
The lack of take up will dampen the listing price, which is more likely to be at the lower end of the scale, around $2.25 rather than the expected $2.80.
The Greens and Labour may have scored political points, but effectively they have slashed the Government’s cash investment to fund health, education and infrastructure programmes.
It will also ensure the Government’s desired “second investment front” remains unopened thereby leaving intact New Zealand’s love affair with the non-productive real estate sector.
So who pays the price for the opposition’s political gain? Every Kiwi, even those they claim to champion.
Professional and institutional investors will not be daunted by any of this and are making big offers, but with fewer "mum and dad" buyers they may not have to go to the market for as many shares when they are listed on 10 May 2013.
This is not panning out the way the Government envisaged and may spook their confidence for future asset sales although reports from The Wall Street Journal suggest the Treasury has called for investment banks to tender for leading roles in the partial privatisation of Meridian Energy and Genesis Energy.
Early trading on 10 May 2013 will be watched keenly by politicians, investors and mums and dads alike for all sorts of reasons and not everyone is going to end up happy…..but just which group is going to be disappointed is the billion dollar question.