You are here: Home - Investing -

Taxpayer lost out on Royal Mail sale – watchdog

Written by:
The government could have reaped more value from the Royal Mail sale it if had been less cautious and better controlled access to shares, the National Audit Office has said.

In a report published today, the watchdog probed the reasons behind the sudden jump in the Royal Mail share price after the floatation in October 2013.

NAO head Amyas Morse said the Department for Business, Innovation and Skills (BIS) succeeded in getting the company listed on the FTSE 100, but added its approach “was marked by deep caution, the price of which was borne by the taxpayer”.

“The government retained 30% of the company. It could have retained even more and allowed the taxpayer to participate further in the rapidly increasing share price and thus limit the cost of to the taxpayer of its cautious approach.”

On the first day of trading, Royal Mail’s shares closed at 455p, 38% higher than their sale price. This represented a first day increase in value of £750m for the new shareholders. Five months later, the shares were worth 72% more than the sale price.

BIS set a “cautious low” price of 260p, the report said, due to the perceived need for haste and the price indications given by a small number of priority investors. Its process of ‘book-building’shares failed to identify demand at higher prices.

In addition, BIS gave priority to a small number of investors, in the belief they would form a stable and supportive shareholder base. However, according to the report, nearly half of the shares allocated to these priority investors were sold at substantial profit within a few weeks of the sale.

NAO also questioned the department’s decision to sell the full 60% of shares available for sale at once, rather than holding some back until the price had appreciated: “It could have retained 110 million more shares worth £363m at the offer price, while still achieving the policy objective of reducing the government’s ownership to below 50%.”


Tag Box

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Could you save money with a social broadband tariff?

Two-thirds of low-income households are unaware they could be saving on broadband, according to Uswitch.

How to help others and donate to food banks this winter

This winter is expected to be the most challenging yet for the food bank network as soaring costs push more pe...

Your rights for refunds if travel is affected by strikes

There have been a wave of strikes this year across many different industries, and more are planned over Christ...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week