As regular readers know, I’m not too fond of governments owning corporations. Personally, I think governments should be investing in education and infrastructure, for instance, instead of insurance or real estate companies.
Most of the Scandinavian governments have a long history of ownership in private corporations. Sweden is trying to gradually sell off some of their stakes, and Finland is doing the same.
Jyri Häkämies, pictured above, is the Minister of Defence for Finland. He also gets to oversee the three classes of government ownership in corporations. Those classes include 1) companies that need to be owned because of legislation (like alcohol sellers), 2) companies that may have national defence implications (like oil or airlines), and 3) companies that the government shouldn’t be invested in anyway (like insurance or steel manufacturers).
Last week shares in Outokumpu soared on speculation that Finland was going to sell off it’s 30% stake to ArcelorMittal. Outokumpu rose about 8% more than the Helsinki index did as a whole, leading me to believe that 1) there may be some speculation for a whole bid for Outokumpu, or 2) there is a discount in the prices of companies that have large government stakes.
It is probably a bit of both, but on further examination I was rather surprised to discover that most companies I follow that have a large government ownership stake are a bit undervalued compared to those in the industry that don’t have a government shareholder. This bothers me, for obvious reasons.
I don’t know if the rumours about Outokumpu and ArcelorMittal are true or not. But I hope that the government does sell their stakes in companies they have no business owning in the first place. €24 billion would build a lot of schools and roads.
Disclaimer: I have an ownership stake in Outokumpu, so there might be some conflict of interest in my opinion. Nothing against Mr. Häkämies, who I think is doing an admirable job, but I would prefer to share ownership with other private entities that have the same desire for business success as I do.
Photo courtesy of the Prime Minister’s Office / Lehtikuva Oy.