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Second thoughts - the losers in the TradeMe sale

Second thoughts - the losers in the TradeMe sale

The private sale of TradeMe to Australian newspaper conglomerate Fairfax is an opportunity lost for New Zealand, according to Massey management lecturer Craig Prichard.

He says signs of that loss are already showing.

Dr Prichard says the sale that put $700m into the hands of a tiny number of owners is out of line with the character of ‘new economy’ business. He says more creative thought should have gone into how to distribute this value before a private sale was agreed.

“The opportunity’s been lost for New Zealand to show how we can not only do creative things but also creatively distribute the value such work realises”.

Dr Prichard says most Kiwis, himself included, would agree that Sam Morgan and fellow investors deserve a healthy return for their hard work and interest.

“But the private sale figure of $700 million now being transferred to just eleven recipients is not only unreasonable but, more importantly, problematic for New Zealand. It shows the need for New Zealanders to consider new structures for distributing the value these businesses create. This massive privatisation of value creates problems that could have been addressed more creatively.”

Dr Prichard says that problems are already appearing: ‘Sam Morgan noted in his comments to the Dominion Post published last Saturday that at the Trademe office the ‘atmosphere is a little uncomfortable’.

“The private sale apparently leaces empty-handed the 40 or so non-investor staff members who no doubt ploughed, in true Kiwi-fashion, unpaid hours and personal resources into TradeMe to cope with its tremendous growth”.

He says there are two other groups who are likely to be uncomfortable. One is the TradeMe trader community and the other New Zealand, itself. “Trademe is a product of community building underpinned by the huge investment by New Zealanders in internet-capable home computers and the learning to work them. We’ve all shouldered the cost of TradeMe to an extent that allowed them to operate with low overheads and be extremely asset-light.

“I’m suggesting that in future we think more about whether this kind of distribution of value really is ‘a fair go’ for all of those involved in creating the value that the sale realizes.”

Dr Prichard says the third group – New Zealanders as a whole - may also feel a little uncomfortable with the way things have turned out.

“New Zealand is extraordinary because of the extraordinary number and density of simple economic activities whose economic value is sucked offshore. A TradeMe transaction can now be added to that list.”

Dr Prichard says there are a number of creative options for dealing with the distribution of value from new economy firms. “One might have been some kind of preferential nominally priced block shareholdings for staff and traders as part of a public offering. This would recognize the contribution and on-going support of these groups and allow Morgan and his colleagues the out they were looking for.”

He also cites the example of Fonterra which adopted a cooperative ownership structure. This helped the users of the business to collectively share the risk and returns of doing what they all needed to do – get their produce from farm gate to customers.

“In a sense Trademe is a modern day equivalent. It is an indispensable cooperative device that users require to make a casual sale/purchase or to realise an income. Before TradeMe these small businesses were like the lonely farmers on the backblocks of New Zealand. Trademe helps enormously to put their goods of small businesses in front of a lot of potential customers.”

Dr Prichard says the TradeMe sale is now history. “But perhaps the next new economy business might recognise creatively the contribution of the community that created the value upon which it trades, and find a way to return some of it those involved in producing it - not simply to the small number claiming the formal role of owner.’”

ENDS

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