Taking Stock 3 April 2025

NEARLY a half of NZ adults will have been made wealthier by the financial gains made by the US communication platform Meta, the owner of Facebook and Instagram.

Harvesting advertising revenue as a result of its success in overseeing the billions of users of its platforms, Meta is by any money-focussed yardstick a roaring success. 

Many would also argue that it is a large contributor to society’s dysfunction, invading privacy and creating a means by which sick people can scar the lives of others.

But Meta is a triumph for its anti-social, emotionally damaged founder Mark Zuckerberg, like many other very smart people, a man at the far end of the Asperger's chart, probably quite close to being autistic. 

His single focus is Meta’s dominant money-generating business. He dresses as he sees fit, seems to shrink from social obligations, and will lick Trump’s cheeseburgers, if in so doing he advances Meta’s future.

Anyone who has worked in the US, or regularly visits their star companies or banks, will know that the American business culture is quite different from ours. 

My list is not comprehensive, but I have watched with astonishment:

1. An absurd demand on executives and staff to sacrifice a balanced life in return for useless excessive wealth.

2. A vulgar attitude towards female staff, including locker room language, coarse behaviour, and an absence of good manners, as well as a reluctance to recognise and promote genuine talent.

3. Acceptance of the ubiquitous use of harmful drugs.

4. Abuse of shareholders’ money by executives, either through personal use of the money or by donating it in huge dollops without shareholder approval.

5. Gross, crass, absurd “stealing” by extracting company money to pay “bonuses”.

The most recent example of the latter was the paying of US$80 million to a Goldman Sachs manager to constrain him from leaving, and the paying of $130 million to three senior executives at that firm.

I doubt any New Zealand investors are unaware of these behaviours. We condone them when we allow our Kiwisaver funds to invest in companies that exhibit these characteristics. To be fair, we probably do not have much detail unless we read whistle-blowing books such as those written by those disaffected by the likes of Goldman Sachs, Amazon, and the Sackler Purdue (OxyContin) company, all of which companies have dreadful practices.

All of this sets the scene for the very recent behaviour of Meta when confronted with a book written by a young New Zealander who had naively joined Meta, believing it would be the source of fairy dust if she could influence it.

Sarah Wynn-Williams, the author, had a brief career as a junior in NZ Foreign Affairs, and at an early age had developed an unworldly dream of making Meta an empire that would convert the world to goodness and transparency.

When she left Meta she wrote a book. The only reason her book hit headlines was because of the quite stupid response of Zuckerberg and his advisers who sought to prevent her from promoting the book. They cited a Non-Disclosure Agreement (NDA) which she had signed at some stage as part of the engagement and termination process. They could not stop the publisher promoting the book.

By attempting to quash her book, Zuckerberg, this smart technology guy with few social skills, drew such attention to it that it sold millions in the first few weeks, grossly over-rewarding what I have to say is a quite anodyne, almost childish book, written by someone disenchanted with the realty of the US business model.

Indeed, without the attention he drew to the book, its sales might have been minimal.

I had it delivered, waded through it, and learned nothing about Meta that I would not have expected, given an understanding of the crazy overworking of those in such companies with their almost singular focus on the financial success and share price of the company.

We all know of the crude and selfish behaviour in such businesses. The book revealed nothing that was newsworthy.

Wynn-Williams wrote a chapter about the lack of sympathy when, as a new mum, she was lactating. She wrote a chapter about the beastliness of managers who expect well-paid staff to sacrifice personal life balance.

She recorded the excruciating details of how former Prime Minister Key literally snatched a photograph of himself with Zuckerberg, after the American had made it unmistakeably clear that he had no wish to meet with Key.

She writes about the problems of trying to set up meetings between Zuckerberg and leaders of countries like Myanmar, that figured their country did not need to engage with Meta. She noted its tax avoidance focus, and saw how the Davos economic forum in Switzerland was an event for plonkers and the media, amongst the real business and political leaders.

Wynn-Williams is clearly a staunch young person, idealistic, ambitious, but hopelessly unworldly when she stalked Meta to land her dream job.

All of this would make nice reading for her grandchildren one day, but it is the core of the book that would never have sold millions of copies had Zuckerberg done what an intelligent person should have done – read the draft, yawned, and reverted to his role as a technology person who thinks his platform rules the world.

I can cast my doubt because never in my life have I used Facebook, Instagram, Twitter (X), Snapchat, or any other such frippery, and thus have never been stalked by lunatics or by advertisers, who will never have heard of me.

This may date me as a survivor from the era when an asteroid put paid to dinosaurs.

Sorry about that!

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SIMON Whimp, the founder of DGL (Dangerous Goods Logistics) changed his name to Simon Henry, perhaps because he discovered that Whimp was the 996,001st most common surname in the world, a humble obscure rating.

Or perhaps he was expressing a view to distance himself from his brother, Bernie Whimp, whose financial misadventures had been widely published by the likes of the Financial Markets Authority, and are readily available on Google, with quite explicit discussion of his low-ball offers to shareholders 20-odd years ago.

Simon Whimp/Henry founded his company DGL, publicly listed in Australia, and has built wealth by offering to transport and dispose of toxic goods.

His company fortunes slumped a few years ago because of a sensible and accurate forecast he made about the awful My Food Bag, created by Theresa Gattung and a cooking enthusiast, Nadia Lim. Instead of focussing on the improbable growth forecasts, he ruffled the public with disparaging comments about Lim, who adorned the promotional guff that MFB produced.

Had he chosen to be analytical, rather than colourful, he might have been applauded for his prescience. MFB is now worth one-tenth of what Gattung obtained by selling out, and DGL is similarly disregarded by investors.

I was reminded of foolish behaviour by so-called leaders when I read of the juvenile behaviour of the CEO of the land developer, Winton.

The CEO and founder, Chris Meehan, faces a significant fine for his immature response to an unpleasant experience while using public transport.

He fired his assistant, a young woman, for using a travel agent that arranged for him to sit in a seat near a bathroom for a long international flight, yelling at her with the sort of vulgar language that no intelligent man would use in a discussion with staff (or for that matter would use in normal discourse).

The young woman went to the Employment Court and won a six-figure award. One hopes this was not met by the already disgruntled shareholders of Winton, its share price now barely half of its issue price.

Yet within days of this event, I came across headlines in our two major newspapers using the sort of language that one might have overheard outside the cabin in which Lady Chatterley became acquainted with her gardener.

With dismay, last week, I found the same sort of language in Business Desk articles.

I shuddered and I imagine many other investors felt the same.

Perhaps as noted in the previous item in this week’s Taking Stock, the standards of the era of the moa have been swamped. Foul language must be acceptable to the young people of today.

Disclosure: I do not own shares in Winton. This will not change.

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THREE years ago it would have been unimaginable that three of the most reliable NZX-listed companies, Spark, Ryman, and Heartland, would have shares able to be bought for less than the cost of a TT2 ice block.

Spark shares had hovered around $5 for some time, Ryman had reached $15, courtesy of KiwiSaver funds which pledge to track the NZX indices, and Heartland, paying a robust 12c dividend, was well clear of $2.

Today Spark shares are around $2.05, Ryman $2.65 and Heartland 75c, yet one would find it hard to find any analyst that would forecast continuing corporate mistakes by any of these three companies.

We all know Spark’s board of directors made the unhappily common mistake of using revenue to buy back shares at a time when the share price was elevated. Surely this mistake will never be made again. If I had my way, such behaviour would be illegal.

Spark does have more competition, its profits are likely to reflect this, its dividends may fall a little and it has dropped out of one of the indices that hapless fund administrators pledge to follow.

Yet at $2.05 its dividend yield is around 9% (nett), a healthy margin above the NZX50 yield.

Ryman’s woes also reflect poorly on its previous governance and management, which misread the demand, underestimated the extraordinary rise in construction costs, borrowed quite stupidly from American piranhas, misread the housing market, and neglected to raise capital when the share price was soaring, again thanks to index-tracking funds.

Yet its shares are priced today at levels much less than half of acclaimed nett asset backing, making it an obvious source of interest to private equity funds, which usually focus on mis-priced assets.

The problem here is how one assesses the value of Ryman’s assets. Its villas and apartments are easily priced, based on sales, but its assets like its common buildings, bowling greens etc would have no value at all if the organisation closed down. Their valuation is more like an assessment of their contribution to the total package that draws in the residents.

I recall as a moneylender once declining to lend to a sports club that had spent a huge sum on its pavilion. I had questioned its value should the club continue to lose members and eventually merge elsewhere. Of course that eventually happened. More fool the mortgage fund that stepped up.

Who recalls the Foxton and Levin Racing Clubs? What are their grandstand buildings worth now the racing clubs have closed? An old racing club pavilion has at best a value of salvageable building materials.

Ryman is surely a takeover target, as would be Oceania Healthcare, given the discount being applied to the assessable assets.

Heartland has endured profit falls after write-offs and after bearing the cost of Australian expansion. Given the Australian operation’s ongoing success, largely due to the spadework of its former manager, Andrew Ford, the odds are that Heartland will achieve the commitment its board has made to a return to nett profits of around $200 million by 2029, bringing with it a healthy dividend pool.

It too must be a takeover discussion behind closed doors in Australia.

The truth is that when global events are eating into investor and fund manager confidence many opportunities emerge, given the errors typically made during stressful times by spooked markets. Trump’s new attempt to make America an island will undoubtedly bring responses that change the approach of international companies.

Takeovers strip shareholders of value, if they are made at discounts by people who can execute their strategies.

It is fair to note that many private equity purchases do not work out well, a fact probably reflecting the difference between entrepreneurs and hardened business leaders who know how to execute plans. Ron Brierley was an entrepreneur. Jim Wattie and Woolf Fisher were business leaders.

My guess is that in the next financial year fundamentally sound companies will face unwanted takeover offers if market pricing were not reflecting underlying future value.

If the cost of money is to a fall to a level that is improbably low, perhaps led by private credit lending, then the new financial year might be a period when well-governed companies are forced to think of strategies that fend off opportunistic takeovers.

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Travel

Christchurch – 15 April – Fraser Hunter

Ashburton – 16 April – Fraser Hunter

Timaru – 17 April – Fraser Hunter

Tauranga – 15 April – Johnny Lee

Hamilton – 17 April – Johnny Lee

Lower Hutt – 29 April – Fraser Hunter

Auckland (Ellerslie) – 1 May – Edward Lee

Auckland (Albany) – 2 May – Edward Lee

Christchurch – 7 May – Johnny Lee

Nelson/Blenheim – 12/13 May – Chris Lee

Please contact us if you would like to make an appointment to see any of our advisers.

Chris Lee

Chris Lee & Partners