More risks for the Mixed Ownership Model

by Winslow Taggart

It seems that anything that can go wrong, will go wrong for the government’s push on mixed ownership for state assets.

First, the broker community rebelled against excessive Commerce Commission interference for publicly listed companies, after ComCom draft decisions wiped hundreds of millions of dollars of NZ investment away. Senior brokers and funds managers warned that the partial floats will be at risk from investors spooked by the uncertain regulatory environment. The replacement of the tired and emotional Ross Patterson with Stephen Gale is a useful first step, but nowhere near the big shakeup the ComCom needs.

Then, the Maori Council have greedily and opportunistically raised water rights as a blatant grab on future earnings by the power companies that will be part floated. While it seems that the Maori Party have accepted assurances from PM Key, the question is, whether “Mr Market” will do likewise.

Now, the capability of the lead broker for the SOE floats is being called into question. Craigs Investment Partners has just been fined by the NZX Disciplinary Tribunal for bodgy trades by clients. Unknown software errors then compounded the error with faulty filters. This will hardly inspire the government, who is relying hugely on Craigs to lead the process successfully. If their trading system is riddled with faulty filters easily distorted by clients entering rubbish bids, then the government should demand Craig either guarantee their system or spread the load amongst other brokers like First NZ, Forsyth Barr and Hamilton Hindin Greene.

As we are reminded by the wise writings of Warren Buffett, markets are determined by fear and greed. Ominously for the government, their vaunted SOE sales programme may well be defined by a troika of fear; fear of regulation, fear of Iwi interference, and fear of broker failure.

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