Like what you've read?

On Line Opinion is the only Australian site where you get all sides of the story. We don't
charge, but we need your support. Here�s how you can help.

  • Advertise

    We have a monthly audience of 70,000 and advertising packages from $200 a month.

  • Volunteer

    We always need commissioning editors and sub-editors.

  • Contribute

    Got something to say? Submit an essay.


 The National Forum   Donate   Your Account   On Line Opinion   Forum   Blogs   Polling   About   
On Line Opinion logo ON LINE OPINION - Australia's e-journal of social and political debate

Subscribe!
Subscribe





On Line Opinion is a not-for-profit publication and relies on the generosity of its sponsors, editors and contributors. If you would like to help, contact us.
___________

Syndicate
RSS/XML


RSS 2.0

Bad medicine: the sale of Medibank Private

By Jonathan J. Ariel - posted Thursday, 2 October 2014


The ABC also reported that Sen. Cormann stated that the Government wanted to sell Medibank Private at the "right time" to maximise the sale price.

Heads-up Senator. Maximising proceeds is not a function of the "right time", but of the "right time" and the "right means". Just ask any real estate agent.

On Monday, the Senator while spruiking the IPO claimed on the Seven Network's Sunriseprogram that the value of Medibank would be "set by the market" and that "in 2014 there is no reason for the Federal Government to still be running a private health insurance business".

Advertisement

The facts the Senator omitted could fill Sydney Olympic Park's ANZ Stadium:

1. In an IPO, the value set by the market, evidenced by the share price at the end of the first day of trading minus the listing price is synonymous with a loss to taxpayers. That gap, be it minimal or yawning, will expose just how mispriced the share offer was, and by inference, how many millions of dollars were gifted shareholders and advisors (at the direct expense of all Australians, the current owners of Medibank);

2. The Senator crooned that "the government is out to achieve the best possible net return" to taxpayers. He said this as though there is compelling evidence that an IPO is the best means to do so; and

3. The Senator dismissed the role of government in the healthcare space, as though we have perfect competition amongst healthcare insurance providers. On the contrary Senator, there is indeed a role for government involvement in owing a player that commands 30% of the market. For one thing, the government's ability to temper premium rises for a dominant player (itself) sends a powerful message to other market participants.

If we assume the Commonwealth's argument that Medibank must be sold, why are alternatives to IPO not publically canvassed? Alternatives include:

a) Sale to a private equity group;

Advertisement

b) Trade sale, say to a US HMO (Health Maintenance Organisation) or an Asian equivalent;

c) Sale to a foreign pension fund;

d) Sale to a foreign sovereign wealth fund (Singapore? UAE? Norway?); or

  1. Pages:
  2. 1
  3. Page 2
  4. 3
  5. 4
  6. All


Discuss in our Forums

See what other readers are saying about this article!

Click here to read & post comments.

13 posts so far.

Share this:
reddit this reddit thisbookmark with del.icio.us Del.icio.usdigg thisseed newsvineSeed NewsvineStumbleUpon StumbleUponsubmit to propellerkwoff it

About the Author

Jonathan J. Ariel is an economist and financial analyst. He holds a MBA from the Australian Graduate School of Management. He can be contacted at jonathan@chinamail.com.

Other articles by this Author

All articles by Jonathan J. Ariel

Creative Commons LicenseThis work is licensed under a Creative Commons License.

Photo of Jonathan J. Ariel
Article Tools
Comment 13 comments
Print Printable version
Subscribe Subscribe
Email Email a friend
Advertisement

About Us Search Discuss Feedback Legals Privacy