To list on ASX or not?

March 4th, 2013 at 6:59 am by David Farrar

Kate Chapman reports:

An announcement will be made this afternoon after the Cabinet makes its final decisions.

One of those will be whether to dual-list stock on the New Zealand and Australian stock exchanges, as indicated by an Australian media report on Friday.

To do so would fly in the face of the Government’s promise that Kiwi mum-and-dad investors would be at the front of the queue.

It won’t, but it may be perceived as doing so. In reality dual listing is unlikely to greatly change the proportion purchased by New Zealanders. The impact is more likely to be on price.

Business commentator said the Government faced a dilemma.

“On the one hand it wants to get the best price it can for the shares, but in terms of stimulating demand, it’s going to run into political flak.”

Australians can buy shares on the NZX, but listing In Australia would make it easier and increase demand.

Rod Oram is correct. Dual listing will increase the price, but also that Australians can buy shares directly on the NZX also.

I own a number of shares that are listed on the ASX only – and I’m not Australian.

It would also create demand from institutional investors that did not trade in New Zealand.

That would drive up the price and ensure the Government got the maximum benefit from the sale, Mr Oram said.

“The counter of that is, in doing that, they would be guaranteed to increase the foreign proportion of shares held in the company.”

There would be some impact, but the Government’s allocation model will be the prime factor. They are very focused on over 80% being NZ owned.

Dual-listing would also seem to fly in the face of the Government’s argument that the would boost domestic capital markets.

“Listing in Australia does somewhat undercut that,” Mr Oram said.

A fair point.

Labour MP Clayton Cosgrove said the four state-owned energy companies that the Government planned to sell down would inevitably end up in foreign ownership.

A stupid point. This is literally impossible under the law passed by Parliament.

12 Responses to “To list on ASX or not?”

  1. krazykiwi (8,229 comments) says:

    This is literally impossible under the law passed by Parliament

    I’m not sure I understand this. Are the listed shares somehow tagged for purchase by NZers (ie some kind of preference shares) or is there belief that not more than 20% will be sold to ‘foreigners’ because of they’re listed in NZ?

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  2. mikemikemikemike (514 comments) says:

    I think (and I’m happy to be corrected) the controlling stake is going to be held by the government. But the part that will be sold will most likely end up overseas (if not straight away then eventually). It’s a nice spin way of saying “see it isn’t wholly owned by an overseas entity”

    It’s a good way of extracting the best price for the shares though. People wanted it sold for the best dollar and listing it on the ASX is a good way to do that.

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  3. YesWeDid (1,085 comments) says:

    So I guess listing on the ASX means that earlier spin that the shares will be bought by ‘Mum and Dad’ investors was just that, spin.

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  4. David Farrar (1,770 comments) says:

    The Government by law must retain 51%, so none of the four companies can end up in foreign (majority) ownership.

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  5. KiwiGreg (3,589 comments) says:

    As long as New Zealanders refuse to save foreign ownership is inevitable.

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  6. mikemikemikemike (514 comments) says:

    @kiwiGreg – Agreed, I think we need the cost of living to come down relative to incomes so that is easier for more people though.

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  7. Pauleastbay (5,035 comments) says:


    How can we have foreign ownership if the NZ Govt. retains 51%? Maths 101 I’d have thought. Majority v Minority-English 101 I’d have thought.

    New Zealanders own shares in foreign companies, what is the difference if others own shares in ours? I’d have thought it shows faith in a good quality company.

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  8. Cunningham (957 comments) says:

    mikemikemikemike (57) Says:

    “But the part that will be sold will most likely end up overseas (if not straight away then eventually).” says who? I bought Contact shares and still have them. There are plenty of kiwis who will hold onto them long term.

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  9. Ross12 (2,516 comments) says:

    Mike Hosking interviewed John Key on this issue this morning. Firstly a decision has not been made but he said the reason for considering the ASX was “technical” in that a number of Australian institutions invested on behalf on Kiwis. Also he used Contact’s experience against the argument that Kiwis would buy then flick onto overseas investors for the profit.
    (ie. Contact still has a large number of the original Kiwi “mum and dad” investors). Looking up the podcast would be worthwhile for those interested.

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  10. mikemikemikemike (514 comments) says:

    Cunningham, Based on the fact that they are being listed overseas, this (hopefully) will increase the demand for the shares and hence the price, meaning you’ll have a smaller pool of investors here who will be able to purchase them. If the company performs well and the share price goes up you’ll have an even smaller pool of NZ investors to purchase them and higher demand from OZ.

    I don’t think its a bad thing, I just don’t see the point in trying to bullshit anyone into thinking these things will stay owned by NZ’ers.

    I think you are well and truly in the minority when it comes to first being able to purchase and then retaining your shares. Again this is not a bad thing – but we need to stop kidding ourselves if we think that NZ ‘mum & dad’ investors will make up the bulk of the 49% of shares that will be sold.

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  11. Tauhei Notts (2,362 comments) says:

    If listing of Mighty River Power on the ASX will hasten the mutual recognition of imputation/franking credits then it will be a good idea.

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  12. Akld Commercial Lawyer (166 comments) says:

    At the risk of diving into politics, Labour are not helping themselves by having the clown comment on the mixed-ownership model. This being a case in point. This will be a very big float for the NZX and the NZ market. Dual listing makes a great deal of sense for most of the reasons that a NZ company dual lists. Even though the informed commentators are probably right about the limited amount of business that MRP might plan to do in Australia, at least in the short term, the size of the company means that the institutions will have to have it in their portfolios. For this reason, and analyst coverage, it makes sense to have it dual listed. My pick is that it will not be dual listed immediately – but this will occur before the end of the year, notwithstanding the very large size of the IPO. Please also note that stock exchanges are ranked by liquidity and as a result ASX ranks about #6 – meaning we have a significant stock exchange on our doorstep with easy access for NZ companies. Going forward, for a very large company to expand, which we must assume MRP will want to do in the medium to longer term, having access to the deeper pool of savings built by a generation of compulsory super in Oz makes this an easy one. I suggest that you ignore the nonsense from a politician whose views on a range of important topics have shown that he should be ignored and stick to the (business) fundamentals.

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