11th July 2014
The sale of Royal Mail cost taxpayers over £1 billion because the shares were sold too cheaply, according to MPs.
In a report by the Business Innovation and Skills committee it said the £3.3 billion floatation of Royal Mail was badly handled by the government and has left taxpayers between £1.1 billion and £1.2 billion out of pocket.
The committee of MPs said the government feared failure and acted on bad advice over the privatisation of the company in October.
In its scathing report, the committee said the shares were undervalued and the property owned by Royal Mail had been mispriced.
‘We believe the fear of failure and poor quality advice led to a significant underestimate of the demand for Royal Mail shares,’ said Labour MP and committee chair Adrian Bailey.
The report added that external adviser Lazard, which worked alongside UBS and Goldman Sachs on the initial public offering, ‘failed to gauge demand at higher price levels and didn’t give appropriate consideration to maximising value for money for the taxpayer’.
However, business secretary Vince Cable who heads up the Department for Business which spearheaded the floatation defended the sale.
His department said the committee’s report contained ‘factual errors and misunderstandings’ and that the sale made £2 billion for taxpayers.
The shares were priced at 330p when they were sold in October but jumped as high as 618p a share but now sit at 473p.
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.’
He noted the share price was ‘very, very volatile’.
‘These things go up and down and we’ve seen in the last few weeks the price of Royal Mail shares actually falling like a stone.’