U.K. taxpayers missed out on “significant value” in the sale of Royal Mail Plc (RMG) as the government’s fear of failure meant the shares were floated at too low a price, an all-party panel of lawmakers said.
The advice the government received on the sale wasn’t “up to standard,” with Lazard Ltd. (LAZ:US), the financial adviser, UBS AG (UBSN) and Goldman Sachs Inc. (GS:US), the global coordinators, failing to gauge demand adequately, Parliament’s Business Committee said in a report published today.
“Fear of failure and poor quality advice led to a significant underestimate of the demand for Royal Mail shares,” Chairman Adrian Bailey, an opposition Labour Party lawmaker, said in a statement. “The government’s inclusion of Royal Mail’s surplus assets in the selloff, without the prospect of clawing back future proceeds, may also mean the taxpayer losing out once again.”
Business Secretary Vince Cable ordered a review of how the government conducts privatizations two days ago, amid criticism of his handling of the sale. Shares in the postal company soared on the first day of trading in October, reaching 80 percent more than its value in January. As recently as April, ministers insisted the stock had been adequately priced, after a National Audit Office report concluded the government took a cautious approach to lock in priority investors.
The Business Committee said it was “disturbed” the government also failed to get an adequate return on assets that included three London sites valued by the government at about 200 million pounds ($342 million), and which the NAO said could be worth as much as 830 million pounds.
The panel also found many preferred investors sold the shares at a profit soon after buying them. It called for the government to publish a list of the preferred investors and state which of them sold their shareholding, when, and at what price.
While finding no evidence of inappropriate behavior, the committee recommended that companies advising the government on share issues should be excluded from becoming a preferred investor.
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