Citizen Thiel
Govt cops flak from right and left
The Government is taking flak from both ends of the political spectrum over its dealings with US billionaire Peter Thiel, with the New Zealand Initiative blasting its recent co-investment as “corporate welfare”.
Eric Crampton, economist and head of research for promarket think-tank NZI, had previously defended the Government’s granting of citizenship to Thiel, who got the nod after asking then-Internal Affairs Minister Nathan Guy to waive requirements he live or intend to live here due to “exceptional circumstances”.
Crampton said that decision was a “bet worth making at the time, and one that should not be regretted in retrospect”.
But after revelations Thiel exercised a buyout option in his partnership with the publicly funded New Zealand Venture Investment Fund — a move that netted the Paypal founder $24 million in profits while leaving NZVIF barely breaking even despite both parties bearing equal risk of loss — Crampton said going into business with Thiel was a gamble the Government should not have taken.
“The Government should not be involved in investment pump-priming activities.
“Economic diversification schemes in which the Government shares in the downside risk if the investment turns sour but only benefits on the upside through increased tax revenues from a successful business are adventures best avoided,” Crampton said.
Venture capitalist Lance Wiggs, who said NZVIF crowded out private-sector ac- tivity, welcomed the scrutiny being applied to the Government’s venture capital forays.
Wiggs said the buyout option used by Thiel to profit from stockpiling Xero shares was “a lousy clause”.
“If you saw you could invest millions [in] a listed company, and get that financed for free by the New Zealand Government — why wouldn’t you do that? I would’ve done the same. You can’t fault Valar for being smart — but you can blame the NZVIF.” The NZVIF has declined to discuss the terms of its Valar deal citing commercial sensitivity.
Finance Minister Steven Joyce, whose previous tenure as Minister of Economic Development covered the NZVIF during the entire period of the fund’s operation and buyout, this week continued to blame Labour for Thiel’s multimillion-dollar payday.
The partnership between NZVIF and Valar was announced by Joyce in 2012 and bought out by Thiel last October. But Joyce said the buyout option had been a feature of the NZVIF’s formation in 2002 by the Labour Government until he had requested it cease being used in 2015.
Labour Party’s immigration spokesman Iain Lees Galloway has previously labelled the arrangement a “sweetheart deal” for Thiel overseen by Joyce.
Crampton called on the political finger-pointing to end.