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‘Cautious’ Royal Mail sale short-changed taxpayer, claims report

Published: 19:28 01 Apr 2014 AEDT

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The government “short-changed” the taxpayer in last year’s controversial privatisation of Royal Mail (LON:RMG), according to the National Audit Office (NAO).

In a damning review of the government’s decision to sell a 60% stake in the postal service in October for 330p a share, the NAO said the government was too cautious in its approach.

“The Department was very keen to achieve its objective of selling Royal Mail, and was successful in getting the company listed on the FTSE 100,” Amyas Morse, head of the NAO, said.

“Its approach, however, was marked by deep caution, the price of which was borne by the taxpayer.”

Royal Mail shares spiked on debut, closing at 455p on their first day of dealings – a rise of 38%, which could have seen the taxpayer pocket another £750mln from the flotation.

The shares continued to rise and have settled above 550p since breaching 600p in January.

The government gave 10% of the shares to Royal Mail’s postal staff and now holds a 30% stake.

Business secretary Vince Cable said: “Achieving the highest price possible at any cost and whatever the risk was never the aim of the sale. 

“The report concludes there was a real risk of a failed sale attached to pushing the price too high. And a failed sale would have been the worst outcome for taxpayers and jeopardised the operation of Royal Mail.”

The audit office said the decision to price the shares at 330p was influenced by Cable’s desire to lure in long-term, blue chip institutional investors.

However, the report revealed six of the 16 so-called ‘priority investors’ brought in by Cable had dumped their stakes within weeks of the IPO at a healthy profit.

By the end of January, just 12% of the shares were in the hands of these investors.


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