Happy New Year to all.
Is selling assets a good idea?
•We look to one of the longest standing, most successful, elites in the world – the English aristocracy, their strategy “don’t sell land– lease it” that way you hold onto stuff.
•If the asset gives a return at or above your weighted average cost of capital, don’t sell, particularly if there are some capital gain and inflation offsets along the way.
Are all assets the same?
•Let’s face it given the opportunity to buy into a monopoly or near monopoly, or an asset that can priced to leverage the selling price of production we would, or conversely you held it why would you sell it? Power generation fits this profile an airline does not.
Does the type of ownership influence the quality of governance and management of an asset?
•Maybe but there is no clear answer, assets in private hands are run badly and very well, the same applies to public ownership.
So a few conclusions:
•Without a good reason to sell don't, feeling you have to might say more about your state of mind on alternatives than the wisdom of selling.
•Unless you really, really have to, and it is hard to see why that would be the case on any asset that is providing a return above the weighted average cost of capital, there is no good reason countenance privatisation of a near monopoly, and see monopoly rents transferred from the public domain.
•Sell the all the airline but not the power companies.