The debate on National’s plan to sell a minority share in a very few state-owned assets (just 3% of the $245 billion worth of assets it owns) has been characterised by misinformation and scare tactics.
Opponents who don’t want the facts to get in the way of their stories don’t explain the alternative to selling a minority share of a very few assets is having to take on a lot more debt.
The debate has also shown a high level of financial and business ignorance from opponents who don’t understand what’s being suggested and why.
Credo Quia Absurdum Est has come to the rescue with a simple explanation:
Say you own a business. You have invested a lot of your capital into it (this is where it may get hard for pinkos to understand, as they have probably never experienced this) and growth is stable.
You need to expand, but you are wary of taking on debt to fund your expansion. You’ve also had your production manager come and tell you that you are going to need to reinvest in new technology and replace machinery to keep up with the play and ensure you remain competitive. There’s also the small matter of your factory needing a new roof.
You know there are a few people keen on your business, but you don’t want to lose control of it after working so hard. So you approach them and say “hey, for X dollars, you can buy up to 10% of my company.” You ensure you retain 51% ownership, and sell two lots of 10% shareholdings and a lot of smaller shareholdings up to the 49% level. . .
You can read the rest here.