Auckland Council has sold its remaining 9.7 percent stake in Auckland International Airport.
The sale will return at least $1.31 billion dollars for the Future Fund.
NZ Herald business editor at large Liam Dann explains what this means going forward.
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Speaker 1 (00:00):
So I'd like to welcome into the studio lim Dan Andrew.
There we are. He's going to held Business Editor at large.
And so the big news yesterday was that Auckland Council
sold at staken in the airport for about one point
three million dollars. They were quite happy with that because
that was twenty cents over an estimate. But there we go.
Now the money is going to be used for the
Auckland Future Fund. So let's talk Liam about this money
(00:21):
and we'll talk about how it's now going to be used.
Because the councilor's got this fund to inure itself against
future shocks et cetera. It has to do something with
the money. What's going to happen to the money?
Speaker 2 (00:31):
Yeah, So from an investment point of view, it makes
sense when you why would you have all your money
in one stock effectively not all your money, but you
know a big chunk of that money in one stock.
You don't do that. You have a fund with the
whole range of stocks, and you probably you don't, you know,
stick with the nz X. You're probably going to head
offshore and go to the most lucrave markets and try
and get a better, more stable return because you're you're
(00:54):
you know, you're vulnerable with one stock, so it makes sense,
but it kind of felt to me like the end
of a little bit of a sorry saga. I've been
covering the Council's efforts to get out of, or not
out of sell these airport shares since about two thousand
and two. I think I could find the Herald talking
about it since nineteen ninety nine. So there's been various
(01:16):
times where there's been big interests from overseas players ninety nine,
two thousand and seven where the Council could have sold
what was a strategic stake, like almost a controlling stake
above twenty percent for a premium, and then they could
have gone and used the money somewhere to generate more return.
Speaker 1 (01:34):
But if you're saying they could have made more if
they sold earlier.
Speaker 2 (01:39):
Yeah, I think what held the whole thing up, obviously
in its democratic process, is there was a debate for
a long time which has been lost by the state
ownership people, really about whether we should strategically have a
controlling stake in our own airport, whether we need to
as a council or a government own these assets. And
you know, look the main be some arguments, but clearly
(02:01):
it's been lost. And so what's what's happened is that
we've ended up selling in bits and pieces, selling down,
not taking up the capital. The capital raising the sheer
issue during COVID which moved them below twenty percent. You
lose a premium below twenty percent. Basically, if you want
to sell more than twenty percent, you can get a
very good price if there's a big international buyer looking
(02:23):
to do a takeover. But you know they've done a right,
They've sold on market. They've done right with this transaction.
But if you look back over twenty five years, maybe
there could have been a bit more financially savvy.
Speaker 1 (02:33):
And there's also been argibagi about the Future Fund amongst
the councilors themselves. This is Waved Brown's big idea, you know,
just to try and free up capital because he's seen
he's had to do all the stuff after the storms,
he's had to do all every now and then you
get a shock, and when you get a shock, you
have to pay for it and then you head up
the rate payers and he doesn't want to do that anymore.
So now we're going to have debate about what to
(02:54):
do with the one point three billion, how much of
it to keep liquid, how much of it to stick away?
Another ethical to be going to get a straight into
tobacco stocks because they're making good money, or you said
as soon as you said, they'll go for an overseas market.
But you know, so it is on the council Richard Hills,
how much it invested in New.
Speaker 2 (03:14):
Zealand company, How much political obligation do they have to
do all that? But really, if it becomes like a
you know, we've got a good model and the n
Z super Fund, which is is trying to be sort
of ethical ish. You know, I think they're still in
oil stocks, but they've got out of you know, they're
not in guns and all that, all that sort of stuff.
You know, so ethical ish and really, you know, at
(03:36):
this point you're going, well, this fund is meant to
maximize the return for rate payers, and so I guess
they've got to look at setting something up that can
do as well as that and of course return more
than the airport returns over the next few years.
Speaker 1 (03:50):
We need to minimize the dead rats that need to
be swallowed. You go, but here's and here's the thing
that I talked about last hour. From my point of
view was that all the bunny went into to the
council's coffers came out of stocks elsewhere in the market,
so overall the nz X dropped. It actually had its
worst day, and it just struck me that that shows
(04:11):
you just how few real hero stocks we have, and
that the brokers all jumped through the for the newest thing.
And while this doesn't affect each of the companies, you know,
it does affect their ability to capitalize and do all
sorts of thot.
Speaker 2 (04:23):
Airport's a useful thing if it's in a portfolio because
it's not going anywhere. It'll go up and down with it.
But you know, it's considered an infrastructure stable investment, not
a huge returner. But it does reflect the fact that
the money's all been heading to Wall Street. I mean
those tech stocks, you know, the thing propping up our
KIV saber funds and it's I'm reading stuff. It does
(04:43):
worry a few commentators that, you know, by pouring all
that money into Wall Street, it just grows and grows
and grows. It's pretty highly valued already, So in a
funny sort of way, it's a bit of a dilemma
for them really whether they go for all those highly
valued stocks that have returned so much over the last year.
Speaker 1 (04:59):
Yeah, well like Nvidio. You know that that's a hero stock, absolutely,
but also some people are also going, well, it might
not be as much of a hero as you think,
and so if that's the case, then you've got to collapse,
so you know. But at the same time, what I'm
saying is in New Zealand, it would be great if
we had a few more hero stocks.
Speaker 2 (05:14):
I think that is I think that is a big
issue with our economy, the lack of a really large
financial sector. We don't have the banks, we don't have
you know, we have a fledgling tech sector but not
really listed, you know, so we don't have a great
representation of the economy on our share market. We haven't
for a while. And it's just got so much easier
(05:35):
for that. All the young people coming into stocks and shares,
which is great on shares's and whatnot. They can just
go around the world and.
Speaker 1 (05:41):
So you know, you know where the money is. The
money is in our houses, that.
Speaker 2 (05:44):
Is right, And that's a whole other conversation.
Speaker 1 (05:47):
Good stuff.
Speaker 2 (05:47):
Thank you so much, Liam for more from Heather Duplessy
Allen Drive. Listen live to news talks. It'd be from
four pm weekdays, or follow the podcast on iHeartRadio
So I'd like to welcome into the studio lim Dan Andrew.
There we are. He's going to held Business Editor at large.
And so the big news yesterday was that Auckland Council
sold at staken in the airport for about one point
three million dollars. They were quite happy with that because
that was twenty cents over an estimate. But there we go.
Now the money is going to be used for the
Auckland Future Fund. So let's talk Liam about this money
(00:21):
and we'll talk about how it's now going to be used.
Because the councilor's got this fund to inure itself against
future shocks et cetera. It has to do something with
the money. What's going to happen to the money?
Speaker 2 (00:31):
Yeah, So from an investment point of view, it makes
sense when you why would you have all your money
in one stock effectively not all your money, but you
know a big chunk of that money in one stock.
You don't do that. You have a fund with the
whole range of stocks, and you probably you don't, you know,
stick with the nz X. You're probably going to head
offshore and go to the most lucrave markets and try
and get a better, more stable return because you're you're
(00:54):
you know, you're vulnerable with one stock, so it makes sense,
but it kind of felt to me like the end
of a little bit of a sorry saga. I've been
covering the Council's efforts to get out of, or not
out of sell these airport shares since about two thousand
and two. I think I could find the Herald talking
about it since nineteen ninety nine. So there's been various
(01:16):
times where there's been big interests from overseas players ninety nine,
two thousand and seven where the Council could have sold
what was a strategic stake, like almost a controlling stake
above twenty percent for a premium, and then they could
have gone and used the money somewhere to generate more return.
Speaker 1 (01:34):
But if you're saying they could have made more if
they sold earlier.
Speaker 2 (01:39):
Yeah, I think what held the whole thing up, obviously
in its democratic process, is there was a debate for
a long time which has been lost by the state
ownership people, really about whether we should strategically have a
controlling stake in our own airport, whether we need to
as a council or a government own these assets. And
you know, look the main be some arguments, but clearly
(02:01):
it's been lost. And so what's what's happened is that
we've ended up selling in bits and pieces, selling down,
not taking up the capital. The capital raising the sheer
issue during COVID which moved them below twenty percent. You
lose a premium below twenty percent. Basically, if you want
to sell more than twenty percent, you can get a
very good price if there's a big international buyer looking
(02:23):
to do a takeover. But you know they've done a right,
They've sold on market. They've done right with this transaction.
But if you look back over twenty five years, maybe
there could have been a bit more financially savvy.
Speaker 1 (02:33):
And there's also been argibagi about the Future Fund amongst
the councilors themselves. This is Waved Brown's big idea, you know,
just to try and free up capital because he's seen
he's had to do all the stuff after the storms,
he's had to do all every now and then you
get a shock, and when you get a shock, you
have to pay for it and then you head up
the rate payers and he doesn't want to do that anymore.
So now we're going to have debate about what to
(02:54):
do with the one point three billion, how much of
it to keep liquid, how much of it to stick away?
Another ethical to be going to get a straight into
tobacco stocks because they're making good money, or you said
as soon as you said, they'll go for an overseas market.
But you know, so it is on the council Richard Hills,
how much it invested in New.
Speaker 2 (03:14):
Zealand company, How much political obligation do they have to
do all that? But really, if it becomes like a
you know, we've got a good model and the n
Z super Fund, which is is trying to be sort
of ethical ish. You know, I think they're still in
oil stocks, but they've got out of you know, they're
not in guns and all that, all that sort of stuff.
You know, so ethical ish and really, you know, at
(03:36):
this point you're going, well, this fund is meant to
maximize the return for rate payers, and so I guess
they've got to look at setting something up that can
do as well as that and of course return more
than the airport returns over the next few years.
Speaker 1 (03:50):
We need to minimize the dead rats that need to
be swallowed. You go, but here's and here's the thing
that I talked about last hour. From my point of
view was that all the bunny went into to the
council's coffers came out of stocks elsewhere in the market,
so overall the nz X dropped. It actually had its
worst day, and it just struck me that that shows
(04:11):
you just how few real hero stocks we have, and
that the brokers all jumped through the for the newest thing.
And while this doesn't affect each of the companies, you know,
it does affect their ability to capitalize and do all
sorts of thot.
Speaker 2 (04:23):
Airport's a useful thing if it's in a portfolio because
it's not going anywhere. It'll go up and down with it.
But you know, it's considered an infrastructure stable investment, not
a huge returner. But it does reflect the fact that
the money's all been heading to Wall Street. I mean
those tech stocks, you know, the thing propping up our
KIV saber funds and it's I'm reading stuff. It does
(04:43):
worry a few commentators that, you know, by pouring all
that money into Wall Street, it just grows and grows
and grows. It's pretty highly valued already, So in a
funny sort of way, it's a bit of a dilemma
for them really whether they go for all those highly
valued stocks that have returned so much over the last year.
Speaker 1 (04:59):
Yeah, well like Nvidio. You know that that's a hero stock, absolutely,
but also some people are also going, well, it might
not be as much of a hero as you think,
and so if that's the case, then you've got to collapse,
so you know. But at the same time, what I'm
saying is in New Zealand, it would be great if
we had a few more hero stocks.
Speaker 2 (05:14):
I think that is I think that is a big
issue with our economy, the lack of a really large
financial sector. We don't have the banks, we don't have
you know, we have a fledgling tech sector but not
really listed, you know, so we don't have a great
representation of the economy on our share market. We haven't
for a while. And it's just got so much easier
(05:35):
for that. All the young people coming into stocks and shares,
which is great on shares's and whatnot. They can just
go around the world and.
Speaker 1 (05:41):
So you know, you know where the money is. The
money is in our houses, that.
Speaker 2 (05:44):
Is right, And that's a whole other conversation.
Speaker 1 (05:47):
Good stuff.
Speaker 2 (05:47):
Thank you so much, Liam for more from Heather Duplessy
Allen Drive. Listen live to news talks. It'd be from
four pm weekdays, or follow the podcast on iHeartRadio
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