To the moon… and back again? (Image: Getty/Tina Tiller)

BusinessOctober 15, 2021

As finance company memories fade, a new generation of investor is shooting for the moon

Contributing podcaster

To the moon… and back again? (Image: Getty/Tina Tiller)

Nearly a quarter of a million of mostly young New Zealanders are now regularly dabbling in cryptocurrencies, which many professional investors see as little better than a scam. Are the crypto fans about to get burnt big time?

It’s a cheap shot that has an uncomfortable sneer to it: “You can’t live in a bitcoin!”

It’s a rejoinder I’ve heard murmured by a few of my boomer mates who can’t understand why so many of their Gen X/Y/Z staff members are actively trading and buying cryptocurrencies such as bitcoin and ethereum. But it’s a comment that’s often made out of hearing distance of this new generation of what used to be called ‘Mum and Dad’ investors. They feel it’s a true and clever thing to say, but they also know it carries more than a hint of smug entitlement that could get them into trouble with colleagues who buy bitcoin because they can’t afford a house.

That lack of affordability may even be the reason these well-paid renters have bought bitcoin in the first place – they’re hoping another spectacular jump in the value of the crypto-of-the-day gives them enough to buy a house, or least to put down a deposit deemed enough by the Reserve Bank to take out a home loan.

The implication of course is that these youngsters are crazy and should just do the sensible thing and buy an investment they can live in, like the house (and a few rentals) the older ones have bought over the years. But for many that has been a dream that faded through the last decade and was destroyed completely with the last 30% jump in house prices since the onset of Covid.

When going to open homes and auctions seems pointless, at least there is Sharesies and Hatch and InvestNow and Stake to trade on. And now there’s also a dozens of exchanges to invest in bits of bitcoin and ethereum and over 150 other cryptocurrencies. The best estimates are that around 220,000 New Zealanders (7.5% of the adult population) have traded or held some form of cryptocurrency over the last couple of years in more than 436,000 different accounts.

Results of a survey asking New Zealanders what sort of investments they hold. Note the percentage holding crypto is higher than stated in the article above, as this survey was of investors rather than all adults (Research undertaken by the Financial Services Council in April 2021 with just over 2,000 New Zealand respondents)

EasyCrypto co-founder and CEO Janine Grainger is right at the centre of the explosion in cryptocurrency trading and experimentation in New Zealand. EasyCrypto describes itself as a retail cryptocurrency platform that has handled over $1.1b worth of transactions since its founding by Grainger and her brother Alan in 2018.

It is the most popular accredited exchange in New Zealand, used to buy cryptocurrencies by a whole new class of investor familiar with the “micro” investing platforms such as Sharesies, Hatch, InvestNow and Stake. These people are also using crypto for various investments, including lending it out for annual returns of 5 to 10% for regular borrowers, and higher for riskier ones.

“The traditional original way to get into cryptocurrency is buy and hold – or hodl (Hold On for Dear Life) as the industry calls it – and sit on them in the hope that they go up in value,” Grainger tells me.

“And for people with currencies such as bitcoin that’s done very well over the long run. There’s also more and more different types of investments coming out now, with things like ‘staking’ where you can have assets that are not only exposed to potential changes in the value of the asset, but you’re also getting a return on the asset,” she says.

“Then another type of thing that we’ve started to see more recently is NFTs — non fungible tokens — basically think of them like digital collectibles.”

EasyCrypto is on quite the growth trajectory. Grainger has just wrapped up a $17m Series A fund raising round that brought in Nuance Connected Capital, along with Pathfinder, Icehouse Ventures, Even Capital, Indonesia’s GDP Venture and US firms Hutt Capital and Seven Peaks Ventures. It has grown to well over 60 staff and is rapidly hiring more.

It’s not just crypto. The demand for DIY investing is rampant and the scale in New Zealand terms is substantial. There are now over 355,000 people with Sharesies accounts, up more than 60% since before Covid. Another 110,000 have Hatch accounts and 40,000 are with Stake.

(Research undertaken by the Financial Services Council in April 2021 with just over 2,000 New Zealand respondents)

It wasn’t always that way. As recently as a decade ago, there were fewer than 50,000 ‘Mum and Dad’ investors who regularly traded shares through traditional brokers or through the online trading platforms of the big banks. Typically, they were older, and owned shares in locally listed companies with the aim of receiving regular and relatively large cash dividends.

These ‘Mums and Dads’ were often wary of enthusiastic claims or anything that looked too good to be true. They remembered the irrational exuberance of the mid 1980s when the dramas on stock markets made the evening news and entrepreneurs such as Bob Jones, Allan Hawkins, Bruce Judge, Colin Reynolds, Michael Fay and Ron Brierley were household names. Then came the 1987 stock market crash, which hit New Zealand individual investors harder than in any other market in the world. Companies such as EquityCorp, Ariadne and Chase Corp exploded into massive conglomerates of unrelated businesses held together by debt and byzantine corporate structures that evaporated as soon as the easy lending stopped.

A whole generation of share club enthusiasts who had mortgaged their houses to buy shares were wiped out and pledged never to go back into a market deemed closer to the wild west than anything fair or predictable. For 20 years, anyone with savings put it in the bank.

By the early 2000s, a few tens of thousands of investors had summoned up the courage to put their spare money into finance companies which, they had been reassured by advertisements in the newspapers, were as safe as the property they were secured by. Unfortunately, much of that security was on development projects, holes in the ground being dug by related companies in control of those same finance companies. A whole new slab of collapses among the likes of Bridgecorp and Hanover Finance wiped out confidence for a whole new generation of investor.

It has taken a couple of decades to iron the dodginess out of New Zealand’s share markets and then wipe away the memories and the dregs of the finance companies. The birth of KiwiSaver funds in 2003 has been a safe and well-regulated introduction for a whole new generation of investors — a type of gateway drug to stocks and shares.

Then the arrival of first Sharesies and then Hatch made it much easier to invest and cheaply trade small amounts in familiar listed companies and exchange-traded mutual funds (ETFs). Covid lit the touch paper for a whole new swathe of young investors with some time on their hands and access to tools that felt more like video games than boring old stock market investing.

The investment explosion since mid 2020 has taken many by surprise and raised concerns that a new inexperienced generation may be putting their money into risky places such as cryptocurrencies. Plenty of bankers and big-time fund managers have judged cryptocurrencies a giant scam that will explode in everyone’s faces as soon as the money printing stops.

But that hasn’t happened. Yet. And many crypto holders are confident this time is different, if only because investors are much more diversified.

Grainger thinks New Zealanders have invested in and traded around $2b in cryptocurrencies in the past year, but that still pales in comparison with the $81b in KiwiSaver funds, the $58b in the NZ Super Fund and the $120b managed by other New Zealand-based funds. Most of that is spread far and wide in bonds, stocks, property and other assets that tend not to move up and down all at once.

The regulators are also keeping a close eye on the development of the sector.

“The FMA has guidance out recently talking about investing in crypto assets and the recommendations for New Zealanders was if you’re going to go get involved, use a New Zealand provider that is regulated and registered here in New Zealand,” she says.

“The New Zealand providers have registered as financial service providers. That means they’re part of a dispute resolution scheme – if something goes wrong, you’ve got a really clear avenue to go down to get that dispute sorted.

“They’ve also got all the right AML (anti-money-laundering) controls in place and that should give you confidence that you’re engaging with parties who are trustworthy and not fly by nighters.”

Diversification is a sensible recommendation for any investor and investment type, she says.

“I would encourage people to look at how they diversify their portfolio, because – [this is] not financial advice, and definitely not individual advice – but as a general rule, diversification is really important,” she says.

“You don’t want all your eggs in one basket. And I see cryptocurrency as one of the buckets that you should be considering as part of a diversified portfolio. It can be a higher-risk bucket that can have higher rewards and maybe it’s 5 or 10% that you’d look at putting in, but it’s worth looking at putting some portion of your portfolio into those asset classes.”

Some are feeling friskier than others, though.

A survey done this year before the latest lockdowns of investors by the Financial Services Council found younger men were the keenest on cryptocurrencies, and the most confident of making big profits.

Not everything changes.

Follow When the Facts Change, Bernard Hickey’s essential weekly guide to the intersection of economics, politics and business on Apple Podcasts, Spotify or your favourite podcast provider.

Keep going!

Lionel Wellington as Tai & Jayden Daniels as Mana in Head High (Photo: South Pacific Pictures/supplied)

BusinessOctober 14, 2021

Head High is groundbreaking, critically acclaimed, super-diverse – and cancelled

Duncan Greive

Founder

Lionel Wellington as Tai & Jayden Daniels as Mana in Head High (Photo: South Pacific Pictures/supplied)

It’s a decision which reveals a number of knotty issues in our pop culture landscape, says Duncan Greive.

Among television genres, serialised drama stands alone. It’s the most discussed, the most expensive, the highest stakes. As a result, dramas invariably have a lot riding on them – for some involved, it will be the biggest and best-resourced production of their lives. And while most shows only get a season or two, those involved sometimes let themselves imagine becoming an Outrageous Fortune – a show which runs and runs, and allows everyone involved to stretch and evolve.

Head High looked like that show for Miriama McDowell (Ngāti Hine, Ngāpuhi) and Tim Worrall (Tūhoe). Set in two neighbouring schools in South Auckland, one private and the other public, modelled after Kings and Ōtahuhu, it centred around a whānau with a Māori mum (played by McDowell) and Pākehā dad (Craig Hall) raising kids through the aftermath of a tragedy. In some ways it was small and domestic by comparison to the hyperbolic standards of many local dramas, but that was intentional. These were meant to be real lives that viewers recognised themselves in.

It also very deliberately set out to correct for an uncomfortable truth. Many of our major dramas over the decades have had some outward diversity in a few key roles, but further down the casting table that dissipated. In crew and in writer’s rooms, it’s been worse still. Head High was different. I had McDowell and Worrall on The Fold, my media podcast, this week, and each spoke passionately about the diversity of their production, about the capacity it built among those involved.

Thus it very much fit with some broader goals increasingly common to local screen production lately, and to NZ on Air, the funding body tasked with facilitating it:

To tell stories more reflective of the full range of life in Aotearoa
For those shows to be made by a more diverse group than has historically been the case, particularly for major drama
To create series which reflect an experience which feels uniquely and specifically of this motu and thus might travel beyond it

Head High did all that while also gathering genuine buzz and strong reviews, including my own. It had a second season, which finished just a couple of weeks ago, also well-reviewed and with an initial blaze of publicity. Then, quite abruptly, it was cancelled.

Follow The Fold on Apple Podcasts, Spotify or your favourite podcast provider.

Speaking to Worrall and McDowell you get a strong sense of the hurt they’re feeling. The show meant a great deal to them, and felt like it had a lot further to run. They also say Three, the network that screened the show and then ultimately cancelled it, failed the production in multiple ways. These include failing to post an episode on-demand at the scheduled time, and being locked out of a folder of social media assets meaning the show was effectively without promotion for part of its run.

I approached Three for comment, and they declined to address the substance of Worrall and McDowell’s claims, but said Three “remain committed to delivering local content as part of the future growth of our business”.

Where to from here for Head High?

Shows don’t normally come back from this. While in the US it is increasingly common to switch networks, or head from linear to streaming, there is little tradition of it here (The Spinoff’s own second season of Alice Snedden’s Bad News, which started on TVNZ, is a notable exception). The reasons for this are complex, partly due to networks having their own competitive dynamic, partly the stench of failure which gets on any cancelled project, and partly the way NZ on Air funds a limited number of big productions for each network, so by picking up another project you’re effectively reducing your ability to commission one of your own.

All this should count against Head High, but if any show has a shot at a second life, it’s this one. Not only for all those public-good reasons listed above, but because it seems to fit with TVNZ’s burgeoning desire to be deeply involved in the big, unwieldy project of reimagining the country. (Some might baulk at the idea of TV channel doing this, but why not own it?). A real, complex and positive Māori story for a mass audience feels like exactly the kind of show the new TVNZ would champion. What’s more, the existing two seasons give it a streaming heft which fits its strategy to lean into local productions and fill out its OnDemand platform.

It’s still a long shot, but Head High has a shot. The bigger question its cancellation raises is the future of the current commissioning model. Head High was, according to Worrall and McDowell, cancelled by Three’s new owners, Discovery. Effectively, they say, by an Australian working out of Sydney, with Three’s long-time commissioner having recently finished up in her role. The show’s creatives say the decision was made because it didn’t rate well enough on linear, but that it was performing well on streaming (Three declined to address the reason for cancellation in its statement).

Streaming is both the best place to meet a younger audience, and the worst place for an ad-supported network to make money. This fact is an increasing source of tension for NZ on Air, which can only fund what platforms put forward for funding, creating a skew, particularly for bigger budgets, toward productions which perform well on linear, which is where Aotearoa’s oldest, whitest audiences are found. These are legitimate audiences, of course – but NZ on Air’s own research reveals how much behaviour has changed for the younger and more diverse younger half of our populace, which remains in what might be called a content funding deficit compared to linear TV audiences.

In any case, what it boils down to is a show which had a large array of social and cultural benefits being cancelled from off-shore for want of a few thousand viewers on one particular – and fading – medium.

Toward the end of the podcast we talked about some of the questions this raises. Discovery is known for kinetic reality and factual programming – think Mythbusters or The Deadliest Catch. Is this a signal that it is moving Three away from drama and towards its core business? This would be a major departure for the network that brought us Outrageous Fortune. A spokesperson for Three said in a statement that local drama remains part of its 2022 planning, but part of Discovery’s rationale for purchasing Three, a loss-making channel at the bottom of the world, was surely that it could save money by putting some of its programming on air here, while also potentially taking New Zealand productions to the world.

This is a good and logical corporate strategy – and exciting for a different part of our production sector – but it would complicate an already difficult scenario for our cultural funders. Would TVNZ assume an ever-greater share of drama budgets, or NZ on Air itself become even more activist in commissioning (which is already happening to an extent)? Some in the industry advocate for a major neutral platform, which might be a partial solve, but who runs and commissions for that would remain a source of tension.

Behind all this lurks the other big unsolved issues of our screen sector: the role of the Film Commission in a streaming world, what to do with gaming (the biggest cultural industry in the world by far, but one we have almost no public funding or incentive strategy for), the TVNZ-RNZ merger, and whether we should pivot to funding shows for export markets to try to bring more investment into this country.

Head High cannot hope to solve all this – but through its cancellation, you can see many of the long-running issues of our screen world. Whatever its fate, those will need to be addressed for this sector to truly show all it can be for Aotearoa.