A Mighty beautiful prospectus
Opinion & Analysis
OPINION: She is a thing of beauty, the Mighty River Power prospectus.
Last Friday's launch felt like the unveiling of the Budget, with a large media pack waiting expectantly for the precious document and then typing furiously as Finance Minister Bill English signalled the lifting of the media embargo.
The 256-page tome didn't disappoint. It contains everything a small investor could ever want to know about the most anticipated float on the New Zealand stock exchange in years, and some.
Levels of financial literacy in this country are low, and bar shaky finance companies, dodgy property investment schemes and dubious gold bullion traders, shares are one of the riskier investments you can make. Markets are volatile and a working knowledge of equities and the type of company you are investing in should be a basic requirement.
So it is pleasing to see the Mighty River offer document spelling out the whys and whereforetos, if not quite in everyday language then at least in an easy-to-follow structure.
The 'Offer Document Overview' on pages 2 and 3 provides a breakdown of what's in each of the eight sections and a statement on 'why you should read this'.
In the legally required 'Answers to Important Questions' it fulsomely covers the basics, and points to the other sections offering more details.
The language could be friendlier, and not everyone knows what EBITDAF and NPAT are. But there is a glossary defining everything from NZX (New Zealand Stock Exchange) to iwi (I'm really hoping readers don't need me to explain this term).
It doesn't hold back on the risks of investing, both in the 'answers' summary and in a 10-page section further in. Everything from drought to natural disaster, fluctuating wholesale electricity prices, the Tiwai Point aluminium smelter being mothballed, lack of funds, and Treaty of Waitangi claims are covered.
School children take note - the sections on Mighty River's business and the electricity industry as a whole are excellent, with many useful graphics.
If I've got a complaint it's that some key information, such as the $48.7 million cost of the float, is buried back in the dense 'Offer Details' chapter.
Perhaps most impressive is the financial information section, which at 123 pages takes up almost half the document.
There are overviews, an analysis of historical performance, prospective financial information, a whole range of accounting information, plus the most recent half-year and full-year results in their entirety.
Compare this with the prospectus for the upcoming Mad Butcher float, which merely provides a set of prospective financial statements with notes and a brief summary of the butchery chain's financials over the past five years.
Admittedly this is a very different kind of offer - a backdoor listing, being sold to the public through brokers. But Mad Butcher franchisees are also being offered a stake and I would hazard a guess these good folk know a great deal more about cuts of meat than they do about equities investing.
Recently listed craft beer brewer Moa's prospectus contains all the same statutory information as Mighty River's, but otherwise the two documents are about as similar as a comic book and a bible.
The financial and technical information in the Moa prospectus is squeezed in between pages of boys' own blarney about duelling, cigar smoking, fly fishing, and opening doors for women. It also features full page, paid advertisements for guns, jewellery, luxury cars, designer suits and body lotions.
You wouldn't expect less from a company involving 42 Below founder and uber-marketer Geoff Ross, and it probably accurately reflects the company's culture so if investors don't like it they can park their funds elsewhere.
But for my money the Mighty River prospectus should be considered the gold standard for offer documents. Anything that raises Kiwis' financial awareness is a good thing.
Whether or not you should invest in MRP or any power company, that's a different story.
Maria Slade is morning editor in the Fairfax Business Bureau. firstname.lastname@example.org
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