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| Royal Mail privatisation £180m underpriced, review says | Royal Mail privatisation £180m underpriced, review says |
| (about 3 hours later) | |
| The government made £180m less from the £2bn sale of Royal Mail than it could have, a report commissioned by Business Secretary Vince Cable has said. | The government made £180m less from the £2bn sale of Royal Mail than it could have, a report commissioned by Business Secretary Vince Cable has said. |
| It says shares could have been valued up to 30p more than the flotation price of 330p because of the high level of demand from banks and individuals. | It says shares could have been valued up to 30p more than the flotation price of 330p because of the high level of demand from banks and individuals. |
| However, former City minister Lord Myners, who led the report, said this would have involved "substantial" risk. | However, former City minister Lord Myners, who led the report, said this would have involved "substantial" risk. |
| MPs have suggested taxpayers lost out by £1bn in the 2013 privatisation. | MPs have suggested taxpayers lost out by £1bn in the 2013 privatisation. |
| But the report calculates the untapped potential revenue to be lower than that. | But the report calculates the untapped potential revenue to be lower than that. |
| Lord Myners was keen to stress that pricing a share sale is a difficult process. Speaking on BBC Breakfast, he said it was a "complicated transaction" and that "if any money had been left on the table it was pretty small". | Lord Myners was keen to stress that pricing a share sale is a difficult process. Speaking on BBC Breakfast, he said it was a "complicated transaction" and that "if any money had been left on the table it was pretty small". |
| He said that lessons could be learned about how to make the process less complicated. | He said that lessons could be learned about how to make the process less complicated. |
| Share spike | Share spike |
| His findings form part of his review into the way the disposal of shares owned by government are conducted. | His findings form part of his review into the way the disposal of shares owned by government are conducted. |
| The probe was ordered by Mr Cable after a National Audit Office review into the privatisation of Royal Mail said too much emphasis was put on rushing the sale - the initial public offering (IPO) - at the expense of value for money. | The probe was ordered by Mr Cable after a National Audit Office review into the privatisation of Royal Mail said too much emphasis was put on rushing the sale - the initial public offering (IPO) - at the expense of value for money. |
| Lord Myners disagreed - saying this view was hard to stand up. | Lord Myners disagreed - saying this view was hard to stand up. |
| Shares accounting for 60% of Royal Mail were sold in the flotation. A further 10% of stock was given to the company's employees, while the government retained a 30% stake. | Shares accounting for 60% of Royal Mail were sold in the flotation. A further 10% of stock was given to the company's employees, while the government retained a 30% stake. |
| Royal Mail shares leapt on their first day of trading in October 2013 by 38%, rising later to a peak of 615p. They now stand at 394p. | Royal Mail shares leapt on their first day of trading in October 2013 by 38%, rising later to a peak of 615p. They now stand at 394p. |
| Lord Myners' report says that a higher price could have been achieved but that "the consensus appears to be that this was the order of 20p-30p per share... equating to proceeds to government at IPO of £120-180m". | Lord Myners' report says that a higher price could have been achieved but that "the consensus appears to be that this was the order of 20p-30p per share... equating to proceeds to government at IPO of £120-180m". |
| It adds: "For the avoidance of doubt, we do not believe that a price anywhere near the levels seen in the aftermarket could have been achieved at listing." | It adds: "For the avoidance of doubt, we do not believe that a price anywhere near the levels seen in the aftermarket could have been achieved at listing." |
| 'Cautious approach' | 'Cautious approach' |
| In his report, Lord Myners said the privatisation, which raised a total of £2bn, was handled "with considerable professionalism" and that the complicated sales process was partly to blame for the sale at a lower than optimum price. | In his report, Lord Myners said the privatisation, which raised a total of £2bn, was handled "with considerable professionalism" and that the complicated sales process was partly to blame for the sale at a lower than optimum price. |
| He added: "The sale was done against a backdrop of global economic uncertainty and a threat of industrial action, which go a long way towards explaining the cautious approach taken throughout the process. | He added: "The sale was done against a backdrop of global economic uncertainty and a threat of industrial action, which go a long way towards explaining the cautious approach taken throughout the process. |
| "We found no evidence to challenge the general assertion that an IPO price greater than 350-360p could have been achieved and we accept that a decision to revise the range would have come with added uncertainty and risk. The right decisions were made." | "We found no evidence to challenge the general assertion that an IPO price greater than 350-360p could have been achieved and we accept that a decision to revise the range would have come with added uncertainty and risk. The right decisions were made." |
| Mr Cable said he was "grateful" for the report. | Mr Cable said he was "grateful" for the report. |
| "It contains a number of significant proposals which could make the general process of future sales more transparent... In particular [financial regulators] should explore how digital auctions could, in certain circumstances, make the sale process much more flexible," he said. | "It contains a number of significant proposals which could make the general process of future sales more transparent... In particular [financial regulators] should explore how digital auctions could, in certain circumstances, make the sale process much more flexible," he said. |
| In July, a report from the Business, Innovation and Skills select committee suggested Royal Mail shares had been undervalued and its property mispriced, meaning the sale could have raised an extra £1bn. | In July, a report from the Business, Innovation and Skills select committee suggested Royal Mail shares had been undervalued and its property mispriced, meaning the sale could have raised an extra £1bn. |
| The Department for Business, however, said the report contained "factual errors and misunderstandings", with Mr Cable commenting that the MPs had the "benefit of hindsight". | The Department for Business, however, said the report contained "factual errors and misunderstandings", with Mr Cable commenting that the MPs had the "benefit of hindsight". |
| "We sold at a price that was regarded as the best that could be achieved in the context in which we sold it," Mr Cable said. | "We sold at a price that was regarded as the best that could be achieved in the context in which we sold it," Mr Cable said. |