Mighty River director, CFO buy up cheap shares

Photo / Alan Gibson

MightyRiverPower director James Miller and chief financial officer William Meek went trawling for cheap shares when the government-controlled power company's share price touched new lows this month.

Miller, a former energy sector analyst, bought 9,000 MRP shares on market on September 11 in two transactions at $2.20 apiece, and topped that up on three more occasions this week, buying a further 15,000 shares at $2.17, according to notices filed with the stock exchange. CFO Meek also bought 2,700 shares on-market at $2.17 on September 13.

That's the second time Miller has used a dip in MRP's share price to go bargain hunting, buying 8,000 shares in May at an average price of about $2.45.

The shares fell as low as $2.16 on September 16, matching a low set in late August, and have steadily declined from the listing price of $2.50. The stock increased 0.5 percent to $2.21 at the open of trading today, and is rated an average 'hold' based on seven recommendations compiled by Reuters, with a median target price of $2.54.

When directors and officers buy shares on market, it's typically viewed as a vote in confidence in a company, implying the trading price is below internal valuations.

The board and executives face a 'blackout' period on November 30, when restrictions are placed on their ability to trade until the company's first-half earnings are announced.

MRP was the first in the government's partial privatisation programme, and is the second-biggest listed power company, thoughit will soon be eclipsed when Meridian Energy joins the bourse. Meridian will publish its offer documents today with a view to listing in New Zealand and Australia on October 29.

A dwindling share price for MRP has eroded confidence in the government's self-dubbed mixed-ownership model programme. The Meridian offer will be done in two tranches, with investors paying 60 percent upfront and the balance over the following 18 months, during which time several dividend payments are expected to be made. Retail investors will also have a cap set on the upper limit of what they will pay.