In the different stories being told about the sell-off of Mighty River Power, not even numerals mean the same thing to everyone.

If you were to go searching for a place where absolute, unarguable truth could be found, you might think you would find it in the realm of mathematical certainty. After all, we like to say that numbers - unlike certain lowly ranked National Party MPs - never lie.

Well, whilst numbers may not dissemble, numerals can be made to tell very different stories. Consider the contrasting tales spun around two sets of them this week.

The first set can be found in the anti asset sales Citizens' Initiated Referendum petition presented to Parliament back in March. At the time it was handed over, the organisers claimed that some 393,000 people had signed it. Proof positive, they said, that the public wanted its voice heard: "Irrespective of what the Government of today says, the people of New Zealand will have their say."

Well, retorted John Key, big whoopie!

It took [Keep Our Assets] over a year to do that, and they used taxpayer money. We've got 287,000 people to pre-register for Mighty River shares in a week.

Then, on Tuesday, the Clerk of the House announced that a random sample of signatures indicated that some 100,000 of these signatures - or about 25% of them - were ineligible because they didn't correspond to any enrolled voter, or contained inadequate information about the signator, or were duplicates. So the petition requires some 16,000 more signatures to force the referendum, with the organisers having another couple of months to find them.

"What a rort!" bellowed John Key;

[Labour and the Greens] have essentially rorted the system and presented a petition with 101,000 bogus signatures; either people that don't exist, made-up people, children, people not on the register.

"And what a massive fail!" chortled DPF;

I’m still staggered for now that despite spending $400,000 and having the entire memberships of the Labour and Green parties, and most unions, they proved unable to get enough valid signatures.  You could understand it if they were close to the deadline to submit – but they were not. They made a tactical decision to submit early for political posturing, and have ended up with egg on their face.

No big deal, responds Labour's Grant Robertson.

I think the reality is that in a petition like this you've got a lot of volunteers,a lot of people who are collecting signatures who've never done that before. And that's the kind of thing that will happen.

Then we come to the second set. At the end of the initial expression of interest phase of the Mighty River Power sell-off, some 440,000 people had put down their name and contact details. "Extremely pleasing!" said SOE Minister Tony Ryall. It was the "goal of the Government to achieve widespread awareness of the opportunity [to buy], and I believe we have achieved this."

Then today we learn the actual number of people who were prepared to put money down to buy these shares was some 113,000 - only about 25% of those who expressed their initial interest.

"What an outstanding result!" crowed Finance Minister Bill English. Tony Ryall thought so too; "with over 110,000 New Zealand shareholders, it will have the largest share register - by some margin - of any New Zealand company on the exchange." 

"What a disaster", retorts the Green's Russel Norman;

The multi-million dollar ad campaign has failed to con Kiwis into buying Mighty River, they want lower power prices instead.

The supposed 440,000 pre-registered investors turned out to be a figment of John Key’s imagination. The number of retail investors is only half the number who bought into Contact and less than half of what Treasury forecast.

Over two and a half times as many Kiwis have signed the petition calling for a referendum on asset sales as bought Mighty River shares - that tells you what Kiwis think of John Key’s asset sales.

So there we have it. We know with some certainty what numbers these various numerals represent (even if the 100,000-odd ineligible signatures on the referendum petition sheets are a statistical estimation based on random sampling). But what do they mean? Well, that depends on what you think of them.

Comments (12)

by Ross on May 09, 2013
Ross

What we know is that about 3% of NZers bought shares. The low figure is hardly a surprise given that many people live from week to week and simply cannot afford to save, let alone spending on shares. Which makes John Key's claim that this share float was all about mum and dad investors somewhat hollow. Key also indicated pre-float that there would be no scaling. That turned out to be incorrect.

http://nz.news.yahoo.com/a/-/top-stories/16864751/almost-half-of-nz-lives-pay-to-pay/

http://www.interest.co.nz/news/58248/new-zealand-mum-and-dad-investors-number-one-priority-pm-key-when-it-comes-soe-share-allo

by Ross on May 09, 2013
Ross

Tony Ryall stated last night that due to the high level of demand for the shares, some people wouldn't get what they asked for. But Treasury predicted up to 250,000 retail investors would purchase shares. That didn't eventuate, so why are some purchasers missing out?

http://www.interest.co.nz/news/59503/treasury-seeking-retail-banking-service-provider-help-expected-250000-applications-retail

by Andrew Geddis on May 09, 2013
Andrew Geddis

Tony Ryall stated last night that due to the high level of demand for the shares, some people wouldn't get what they asked for.

Well, if you have (say) 1000 people each asking for $1 million worth of shares, that's going to create a $1 billion worth of "demand". So I assume Ryall is talking about the top end investors (who are probably institutional in nature).

by Ross on May 09, 2013
Ross

I assume Ryall is talking about the top end investors (who are probably institutional in nature).

But Treasury were talking about institutional investors, and predicted double the number of buyers than actually bought shares.

by Matthew Percival on May 09, 2013
Matthew Percival

Ross it is hardly Key's fault that Mum and Dad investors decided to opt out between pre-registration and purchase. That's the result of the Labour/Greens policy announcement. An announcement that made the purchase proposition a whole lot more complex.

Key did not indicate pre-float that there would be no scaling. There was always going to be scaling. He indicated there would be no scaling for the first $2,000 (figure off the top of my head) investors pledged to the share float.

The reason for scaling is simple. If investors pledge $3 billion for a 49% stake in MRP which is worth say $1.9 billion it would hardly be fair to take all the investors money would it!

I see the battle to con the public even goes beyond the numbers. 

The multi-million dollar ad campaign has failed to con Kiwis into buying Mighty River, they want lower power prices instead.

If this was the case one would expect to see a swing towards Labour/Greens in the polls. In the one poll I've seen recently (Roy Morgan) the Labour/Greens lost a combined 6% support. Admittedly the Roy Morgan poll is famous for it's large swings but to claim your policy is popular on the basis of "non-purchase" of MRP shares is a stretch.

by Ross on May 09, 2013
Ross

Matthew

If many mum and dad investors suddenly took fright, as you seem to imply, then why the need for scaling? As I've said, the number of buyers was well done on Treasury expectations.

I expect that Labour's policy announcement had little effect. Economist Geoff Bertram had hinted some time ago that there needs to be regulation in the power market. The Commerce Commission released a report last year which said, by implication, that power companies had made billions of dollars of super normal profits. Any rational person would expect that that was not sustainable. Importantly, the prosepctus for MRP explained at length the various risks involved with purchasing shares. In the circumstances, blaming Labour + Greens for the low response rate is a cop-out. Indeed, some on the Right reckon the Labour-Greens policy lowered the price of the shares which made them an attractive investment.

by Ross on May 09, 2013
Ross

The Commerce Commission released a report last year which said, by implication, that power companies had made billions of dollars of super normal profits

Actually it was released in 2009.

by Andrew Geddis on May 09, 2013
Andrew Geddis

Ross,

If many mum and dad investors suddenly took fright, as you seem to imply, then why the need for scaling? As I've said, the number of buyers was well done on Treasury expectations.

I think Matthew has explained this already. Yes, the 113,000 purchasers were fewer than Treasury's top end expectation (and that's all the 250,000 figure was - the absolute top end number that it thought might have wanted to buy). But there was still far more money offered for MRP shares than the firm was "worth". So if the Government took all the offered money and handed out shares to everyone who asked for them, it would be "overselling" the company ... which would royally piss off those investors when the shares subsequently tanked in value. 

Look at it this way. Imagine MRP has a "book value" of $3 billion. Then imagine there were 3 million NZers wanting to buy $1000 of shares each ($3 billion). And one person wanting to buy $3 billion in shares. If the Government sold all those purchasers all the shares they wanted, it would be giving the company an equity value of $6 billion - twice what it is actually worth. Meaning that the day those shares hit the market, they'd halve in value. Which, I suspect, would be a breach of securities law ... and in any case, would be political suicide.

So, to avoid this, the Government can sell only $3 billion in shares. Who, then, misses out on them, given that there is $6 billion in demand for them? Well, the Government could just give everyone 50% of what they asked for. But it wants lots of little investors (politically good to spread the wealth!), so it instead says "everyone wanting $1000 in shares gets them, while we "scale" the request of everyone else" ... meaning the one person wanting $3 billion in shares gets only $1000 worth.

In other words, provided the amount of money offered for shares outstripped the company's book value, the Government was always going to have to scale back the offering to relatively large purchasers. Which is all John Key promised in the article you linked to in your first comment:

“What we’ve said is, when it comes to Mum and Dad, if they want to buy 1,000 shares or whatever it might be, I want to make sure that they get their allocation, they’re not scaled, and they’re at the front of the queue,” he said.

The lower number of such "Mum and Dad" investors means that this scaling happened at a higher point than otherwise would have occured  - I think it kicks in around $15,000, but may be wrong on that.

by Ross on May 10, 2013
Ross

John Key said:

“What we’ve said is, when it comes to Mum and Dad, if they want to buy 1,000 shares or whatever it might be, I want to make sure that they get their allocation, they’re not scaled."

It turns out that some mum and dad investors, wanting to buy a mere 2000 shares, were indeed scaled.

http://www.nbr.co.nz/article/govt-details-mighty-river-share-allocations-refunds-nz-individual-investors-ck-139904

by Andrew Geddis on May 10, 2013
Andrew Geddis

It turns out that some mum and dad investors, wanting to buy a mere 2000 shares, were indeed scaled.

I'm not sure what the point is here, Ross ... but you'll note from that story that anyone who preregistered their interest got up to $15,000 in shares (6000 of them) without scaling. It's only those "mum and dad investors" who didn't preregister (despite the oodles of advertising telling them to do so) whose application for less than this was scaled. And, in any case, the Government only promised the first $2000 in shares wouldn't be scaled ... so even getting up to $4000 in shares (which unpreregistered folk did) was better than promised.

But like I say - I am not quite sure what we're arguing about.

by Ross on May 10, 2013
Ross

the Government only promised the first $2000 in shares wouldn't be scaled

That's not what John Key said. He said "if they want to buy 1,000 shares or whatever it might be, I want to make sure that they get their allocation."  Based on Key's comments, which made no distinction between those that pre-registered and those that didn't, anyone buying 2000 shares (whether they were pre-registered or not) presumably expected to receive their full allocation. The only reason they didn't was because insititutional investors got a fair whack of the shares.

I don't think I am being pedantic.

by Andrew Geddis on May 10, 2013
Andrew Geddis

Ross,

Here is the Government's initial outline of how it planned to carry out its MOM sell off, where it states:

If a Share Offer is oversubscribed (meaning people applied for more shares than were available) investors may receive fewer shares than they applied for. In this case, investors will be refunded the difference between the dollar amount applied for and the value of shares received (this is called scaling).

And here is the explanation from the Financial Markets Authority as to the consequences of preregistering/not preregistering:

Potential investors from New Zealand were invited to register their interest in the MRP offer on the Government's website without any obligation to purchase shares, in order to help the Government gauge levels of interest in the offer. 

Pre-registration was not necessary in order to buy shares.  New Zealanders’ who did pre-register however, will be eligible for up to 25% more shares than someone who did not pre-register, in the event of scaling due to demand exceeding the number of shares available.

And here is a news story in which the Government makes it clear before the share offer opened that only the first $2000 worth of shares would be safe from such scaling.

The offer period was expected to open in mid-April and run for three weeks and to buy shares Kiwis would have to invest at least $1000. They would be guaranteed at least up to $2000 worth of shares

You aren't being pedantic. You are being wrong.

Post new comment

You must be logged in to post a comment.