Mixed Ownership model made simple

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.

10 Responses to Mixed Ownership model made simple

  1. robertguyton says:

    Ele, have you read Gordon Campbell’s piece on asset sales? I sincerely wish you would. Perhaps you could comment on this statement from NZ Herald, Auckland financial analyst Brent Sheather’
    ““I’m assuming Mr Key is a rational person.” The public don’t want the sales, he says, and the financial sector can’t see the logic behind them.

    What Sheather would like to see is a last minute offer of a referendum on the subject, as a sign that Key has listened to the public’s concerns, and has responded in kind. “If he does that, all will be good. If he doesn’t, he needs his head read.”

    http://gordoncampbell.scoop.co.nz/2011/11/24/gordon-campbell-financial-analysts-jump-ship-on-asset-sales/

  2. nellie says:

    The referendum for this is on Saturday. The National Party have made it clear this is part of their economic policy, the Labour Party and everyone else on the left have made it clear to the public what they think of it. The public will decide on Saturday whether it is ultimately acceptable to them or not.

  3. Gravedodger says:

    Frame the debate why don’t you Robert.
    It is a no brainer to expect more than a minority to vote FOR ASSET SALES.
    National proposes to initiate a partial sale of the shares in the companies that operate the energy companies.
    The proposal has safeguards in that maximum holdings are enshrined.
    Kiwi Bank is not on the table.
    It is only Air New Zealand, Solid Energy, Meridian Energy, Mighty River Power, Genisis Energy and only to 49%.
    You are not stupid so stop pretending you are by Banging on about the SALE of STATE OWNED ASSETS please.

    What part of Partial, minority and limited parcels are you choosing to ignore.

    Lies only survive when contrary proof can’t be found and the lies are consistent.
    Have a look at how Mr Goff’s statement on next years recruitment of police is working out.

  4. JC says:

    Todays Herald poll of currently 10,000 people has 55:42% in favour, so that shows asset sales aren’t the game changer Labour thinks it has.

    Whether you sell or not is hardly an issue because either way it balances out.. if you sell you get a big wad of money that reduces borrowing pressure and halves your risk and exposure to the energy sector.. not a bad thing when you consider stuff like earthquakes.

    Taking out the odd one off sales and some big dividends the assets appear to return about 4%.. nice to have but not exciting, and in the last decade they could only be earned by ramping up the cost to the consumer by 70-80%.. hardly a ringing endorsement for public management!

    The other thing that impressed me about the negative arguments.. is we are talking about the loss of $400 million in annual dividends.. ie, we are talking about just half a percent of GDP here.

    Phil and his mates are going to die in a ditch over loose change.

    JC

  5. robertguyton says:

    Well yes, nellie, Saturday will bring a result but that doesn’t preclude discussion of the issues does it? If it does, this blog will die.
    Gravedodger. Couldn’t bring yourself to read Gordon Campbell’s article then eh!
    I know what National intends. Repeating the details does nothing to counter the criticisms that so many have. Campbell’s article explains real concerns held by people who have taken an intelligent look at the proposals and have grave concerns. Why not try something new, Gravedodger, and read outside of the echo chamber? You might just learn something important.

  6. Gravedodger says:

    That is so rich Robert.
    Your consistent threadjacking and framing of the debate to satisfy your cracked record dribble epitomises the riverton ring a ring a rosie.
    ECHO CHAMBER indeed, how apt.
    Notice you didn’t attempt to answer my point about differentiating between Asset Sales as Practiced by your icon of the Left Phil Goff and the opportunity for kiwi investors , Kiwi saver and superannuation funds to invest in our infrastructure freeing up capital for other government obligations as minority shareholdings.
    Not that that is so strange, its your MO.
    Echo Chamber indeed Pfft, wipe the spittle off your mirror you sad sack.
    Oh and all fall down.

  7. robertguyton says:

    ‘Opportunity for Kiwi investors’ are they those ‘opportunities’ that Bill English is unable to assure us will stay in the hands of New Zealanders – those opportunities, Gravedodger?
    As for your ‘superannuation’ claim, wrap your thinking gear around this view from darkhorse (I’ll bet my bottom dollar you’ve got not answer to it),
    ” BillE is planning on selling them to our retirement fund so that we end up in the interestingly circuitous situation of buying something we already own so that we can then pay our retirement investment funds more than it cost us to own them so that our retirement funds can pay for our retirement and the retirement fund administrators a nice profit and BillE can then spend our retirement funds on something else. It is a devious waay for govt to get its hands on our retirement savings without having to pay interest – we will pay the interest through our power bills. This is even stupider than selling assets.”

  8. homepaddock says:

    Robert you’re confusing state-owned with personal ownership.

    If we owned them personally we’d have some control over them and pocket any dividends – but that wouldn’t amount to much because we’d each have only a 4.4 millionth share.

  9. robertguyton says:

    Individual New Zealanders have no stake in the State-owned assets, Ele? We have no control over them, though they we paid for them?
    Crikey!

  10. SHolland says:

    Go the Conservative Party

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: