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Royal Mail underpriced, 'two investment banks warned' Royal Mail underpriced, 'two investment banks warned'
(about 1 hour later)
The government ignored two banks that valued Royal Mail at £5 billion, far more than shares were sold for, the Financial Times has reported.The government ignored two banks that valued Royal Mail at £5 billion, far more than shares were sold for, the Financial Times has reported.
The government sold 60% of the postal service last week for £3.30 per share, rising later to about £5.The government sold 60% of the postal service last week for £3.30 per share, rising later to about £5.
But at least two banks canvassed on the sale said that shares would be worth up to £5 each, the FT claims.But at least two banks canvassed on the sale said that shares would be worth up to £5 each, the FT claims.
Business Secretary Vince Cable has denied the Royal Mail was sold too cheaply.Business Secretary Vince Cable has denied the Royal Mail was sold too cheaply.
Before deciding to dispose of 60% of Royal Mail, the government sought opinion from investment banks bidding to manage the sale and selected Lazard as its independent advisor.Before deciding to dispose of 60% of Royal Mail, the government sought opinion from investment banks bidding to manage the sale and selected Lazard as its independent advisor.
Goldman Sachs, Barclays, Bank of America Merill Lynch and UBS were appointed to lead the sale.Goldman Sachs, Barclays, Bank of America Merill Lynch and UBS were appointed to lead the sale.
Lazard has now been called in by the Commons Business, Innovation and Skills (BIS) select committee to answer questions on the pricing while Mr Cable said he blamed union strike threats for driving down the flotation value of the stock.Lazard has now been called in by the Commons Business, Innovation and Skills (BIS) select committee to answer questions on the pricing while Mr Cable said he blamed union strike threats for driving down the flotation value of the stock.
In a letter to the committee, Mr Cable said: "There were some investors who stated that they were not willing to invest at all and many others who focused on the business and financial implications of strike action."In a letter to the committee, Mr Cable said: "There were some investors who stated that they were not willing to invest at all and many others who focused on the business and financial implications of strike action."
Shares had hit 508.3p, before closing at 502.5p.
Speaking on Friday, Communication Workers' Union general secretary Billy Hayes said: "For Vince Cable to blame the low share price on the possible threat of industrial action is laughable.
"This appears to be Vince Cable's own 'froth' in a woeful attempt to deflect blame for losing the Treasury such a significant sum.
The share price has broken the 500p per share mark today, now more than 50% higher than the level he approved for the float, meaning he's undervalued the company by £1.7bn and lost the taxpayer £900 million."
The Times has reported that the government's advisers believe demand was driven by hedge funds investing in Royal Mail on the belief that union settlements would be easier now the company is predominantly privately owned.The Times has reported that the government's advisers believe demand was driven by hedge funds investing in Royal Mail on the belief that union settlements would be easier now the company is predominantly privately owned.