Here’s a useful little guide to the value of government as an investor – Air France-KLM’s stock fell 11% as the Dutch Government announced it had just bought some 13% of the company. Normally enough a large buyer emerges for a stock that stock rises in value. You know, greater demand and price, all that stuff?
So, what happened here?
France has reacted frostily to the Dutch government’s sudden purchase of a stake in Air France-KLM in attempt to counter French influence. Shares in the airline company fell 11% after the Netherlands government said late on Tuesday it was acting to protect “Dutch interests”. The Dutch bought a 14% stake, aiming to match France’s 14.3% share. French Finance Minister Bruno Le Maire insisted the company should be “managed without national public interference”. The Dutch move began late on Tuesday, with an initial acquisition of 12.7% of Air France-KLM shares.
So, large buyer arrives, picks up a substantial stake in the secondary market and the share price falls? Whut?
What’s happening is that we’re being shown the value of having government as an investor. No, not what Mariana Mazzucato tells us is the value of government as investor. Not what theory tells us might be. But what actual people doing the actual valuing think of the value of government as an investor – it’s negative.
As to why, that should be obvious too. Governments are run by politics, they run things by politics. And politics isn’t the way to run a business, the value of doing so is negative. So, politics intrudes upon the running of a business the business is worth less.