UK government launches review into Royal Mail IPO
The UK government has launched an “informal” review into the process it used to privatise Royal Mail last year.
Business secretary Vince Cable has tasked Lord Myners with leading the review, which will look at how the current IPO process could be improved, and what alternative methods are available for selling off government assets.
Cable’s Department for Business, Innovation and Skills said the review followed recommendations from the National Audit Office assessment of the Royal Mail IPO last October.
The IPO brought criticisms that ministers had significantly undervalued Royal Mail prior to its flotation on the London Stock Exchange.
The IPO saw share prices rocketing by 38% as soon as trading began, peaking at more than 80% higher value than the initial valuation, leading to claims the government had effectively “lost” the taxpayer some £750m from the £1.98bn sale of shares.
Criticism also came because investors who had a “gentleman’s agreement” with the government to hold on to their preferential allocations of shares, in order to provide Royal Mail with some stability, ended up selling their stakes within weeks in order to cash in on the price increase.
Announcing the review yesterday, Cable said: “I have asked Lord Myners to conduct this review, following the recommendations of the National Audit Office, to help me assess whether changes are needed to the current system government operates for the sale of its assets.”
Lord Myners was the UK’s financial services secretary under the Labour government from 2008 to 2010, but has a background in the financial sector.
The UK government does still hold a 30% stake in Royal Mail, and is currently free to sell that stake whenever it sees fit.
“Short changed”
Opposition MPs said yesterday that the launch of the review effectively meant the government was admitting to a “botched” Royal Mail privatisation.
Chuka Umunna, the Labour Party’s shadow business secretary, said the review showed that the IPO was a “first-class short-changing of the taxpayer”.
“Ministers have continued to defend their botched Royal Mail fire sale and maintained that the process was managed correctly, but the fact they have set up this inquiry shows the opposite is true,” said Umunna.
“Taxpayers have been short changed to the tune of hundreds of millions of pounds while large City investors, who were placed at the front of the queue by ministers, have been laughing all the way to the bank at the public’s expense. There are a huge number of questions which ministers need to answer on the mistakes which have been made.”
