What Ryman’s capital raise really means

Sunday, 2 March 2025

Ryman Healthcare raised a billon dollars this week from shareholders, including many Kiwis through their KiwiSaver funds, to help shore up its poor finances.

Sam Stubbs is the managing director of KiwiSaver fund Simplicity.

OPINION: Ryman Healthcare raised $1 billion from shareholders this week, after raising $902 million in 2023. In both cases, it raised the funds at less than the current share price, with this week's discount at over 20%.

Most Kiwis wouldn’t have thought Ryman raising money, again, mattered to them. But it did because Ryman shareholders include more than 3 million Kiwis, via their KiwiSaver funds.

Why has Ryman raised so much money? Put simply, to shore up its poor finances. And the consequences of it not raising money may well have been worse. Capital is the lifeblood of business, and denying companies a financial transfusion is a sure way for them to die.

And other companies have raised desperately needed cash from KiwiSavers recently, notably $700 million by Fletcher Building in October.

Shamubeel Eaqub on the $3 trillion KiwiSaver opportunity.

This really matters, because without KiwiSaver money to bail both out, Fletcher Building and Ryman Healthcare may have been sold, sliced up or be in even more desperate circumstances than they already are. And this could have cost many employees their livelihoods. Fletchers employs 14,900 staff, and Ryman 7700. So how well these companies do matters to all New Zealanders.

Companies raising money in desperate circumstances is not a pleasant experience for anyone. It’s the equivalent of a distant family member asking you to fund their operation. You do it because not helping out would be worse, but it’s not pleasant.

But there is a silver lining, because it’s amazing to see just how much money these companies raised and how quickly. In my career, I’ve never seen anything quite like it, and I doubt that either Fletcher Building or Ryman would have been able to raise so much, so quickly ten years ago. KiwiSaver is already $120b big, and is on track to be over $1 trillion in our lifetimes. Money-wise, we are in a new, richer New Zealand.

So whether the Ryman and Fletcher capital raises is good money chasing after bad remains to be seen. But it is certainly very good news that we have so much saved via KiwiSaver that they get a shot at improving. KiwiSaver is now providing New Zealand with a rising tide of capital, giving us a way to make the next 30 years our best ever. We are where Australia was in 1985, with a decent chance of replicating their savings success.

But to make good use of this rising tide of money, we really do need to step up our corporate governance. Listed company boards are effectively custodians of hundreds of billions of our savings. But too many are doing a poor job. The returns say it all. Our Stock Exchange index has returned 9.5% per annum over the last ten years, versus the Australian index returning 10.1%, the Dow Jones returning 12.4% and the Nasdaq 19%.

Simplicity KiwiSaver Fund founder Sam Stubbs says one of the lessons of this week’s development at Ryman is that KiwiSaver should be compulsory.

So why are our listed companies underperforming? To my mind, a lot has to do with our culture. Kiwis are by nature nice and don't make a fuss. And as a country, we like to look after those who are struggling, and it’s one of the things that makes New Zealand so nice to live in. So we don't rock the boat too much when it comes to corporate underperformance either.

But with our biggest companies, sometimes tough love is needed, and it needs to come from the top. Too many listed company directors are just there for the money, with a sense of entitlement about a well-paid twilight career in corporate governance.

And KiwiSaver fund managers should also be on the front foot when it comes to getting companies to perform. They have a fiduciary obligation to act in the best interests of their KiwiSaver members. And banks and stockbrokers should be more vocal in criticising poor company performance. They have too many ‘Buy’ recommendations and too few ‘Sells’.

To be fair to Ryman, they have comprehensively refreshed their board and management. This is the right thing to do.

But at Fletcher Building, despite some directors leaving, others remain, clinging on by their fingernails. And after a ridiculously long search, the board decided the best candidate for the chairperson role was an existing director. The governance of Fletcher Building hasn’t just been a farce, it’s also been an expensive tragedy for the savings of over 3 million KiwiSaver shareholders.

National’s Scott Simpson has replaced recently resigned Andrew Bayly as commerce minister.

So while two of our biggest companies have made key strategic mistakes, and have been bailed out by millions of KiwiSavers, the silver lining is we also afford to invest more in the companies that are star performers as well.

And this is where the Government has an important role to play, by taking KiwiSaver, and KiwiSavers, more seriously. Because what happens to KiwiSaver matters for our jobs and retirement. We have to seriously consider compulsory KiwiSaver, and whether contributions should rise. Both have happened in Australia, and it shows. They are way richer than us now.

And this, to me, is why the replacement of Commerce Minister Andrew Bayly, with Scott Simpson, is actually more important than it might first appear. KiwiSaver is arguably the most significant piece of legislation in my generation, so whoever looks after it is looking after our future. Let’s hope the Government understands this and lets the minister do the right thing.

There are several lessons from Ryman and Fletcher for all New Zealanders. KiwiSaver now really matters for our future, and governing the companies KiwiSaver invests in should be much more than a well-paid retirement trade. And if we want to fund growing companies - and bail out our big ones - KiwiSaver should be compulsory.