Mark Lister writes in the Herald:
Since listing at $1, Meridian shares have more than doubled, providing investors with a return of more than 100 per cent in less than 18 months. If dividends are included, this return jumps to 125 per cent over the period.
Utility companies such as Meridian are supposed to be predictable companies that offer steady (yet modest) returns. They aren’t supposed to double in price within barely a year the way a high-growth technology share might.
Part of this can be explained by a fall in interest rates over the period, which has made high-yielding shares more attractive and seen investor demand push up share prices.
But with the benefit of hindsight, another key reason for such a strong performance is that they were probably sold a little too cheaply in the first place.
The “NZ Power” reform policy they championed through 2013 and early last year was heavy on emotive rhetoric, and short on detail. Whenever the proponents were quizzed about how it would work or be implemented, there didn’t appear to be many clear answers.
Labour and the Greens seemed to give up on this policy after the last electricity IPO was completed, and it didn’t get nearly as much airtime after that. That adds weight to the view that it was dreamed up only to derail the IPO process.
It was an act of commercial sabotage. They announced it just days before the first sale. It successfully reduced the price people were willing to pay for shares, which meant that the taxpayer lost perhaps a billion dollars due to this policy of sabotage from Labour and Greens.
In that respect, it failed. All it succeeded in doing was creating political and regulatory uncertainty among investors, and reducing the price the New Zealand taxpayer was paid for the 49 per cent of the assets now owned by private investors and managed funds.
The Crown received $1.8 billion (including the 50c a share due shortly) for the 49 per cent of Meridian sold, and that stake is today worth over $3.2 billion. The 49 per cent of Genesis sold down a few months later for $760 million is now worth almost $1.2 billion.
Had it not been for the uncertainty that was created at the time by the Opposition, the IPO sale prices could have been quite a bit higher.
In hindsight, it seems Labour and the Greens might have almost single-handedly contributed to a significant transfer of wealth from the average New Zealander (as the seller) to a much smaller group of people – those who could afford to buy shares in the IPOs.
As someone who invested in all three floats, their policy has made me a five figure capital gain. Thanks Labour and Greens.
While those who bought these shares will be celebrating some excellent returns from investments that should have been relatively boring, maybe the rest of the country is due a belated apology from Labour and the Greens for doing them this disservice.
If Labour and Greens can cost taxpayers one to two billion dollars in opposition, think what they might cost in Government!