Valuing an SOE's Equity

Toby Daglish

No 373500, Competition & Regulation Times from New Zealand Institute for the Study of Competition and Regulation

Abstract: Valuing a new security is always a difficult business. Historically, new firms' shares have been initially sold for far less than the price they subsequently trade at, as evidenced by the high profits accruing to participants in initial purchase offerings. While this first-day return is good news for the firm's initial shareholders, it's bad news for the firm because that money could have been accumulated as capital from their share sale. Toby Daglish notes that a government planning to sell a state-owned enterprise (SOE) is in a similar situation: pitch the price too low, and taxpayers will miss out on part of the windfall.

Date: 2012-03-01
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