Royal Mail Privatisation

  • Royal mail pic

After the privatization of the Royal Mail I am left wondering if the sale was one of 1st class ineptitude or one giant organised theft of public assets or a bit of both.
The privatization was announced in July 2013 by business secretary Vince Cable in the House of Commons:-
"The government's decision on the sale is practical, it is logical, it is a commercial decision designed to put Royal Mail's future on a long-term sustainable business. It is consistent with developments elsewhere in Europe where privatised operators in Austria, Germany and Belgium produce profit margins far higher than the Royal Mail but have continued to provide high-quality and expanding services."
Lets look at this statement in detail:-
"practical" - When is it difficult to give away free money?
"logical" - for the City and other investors who gets their hands on some shares "yes" for the general public "no" as it is the public's asset being sold on the cheap and it is the public who will bear the brunt of the inevitable price rises and welfare payments to redundant workers in addition the public picking up the bill for the pension deficit.
"a commercial decision designed to put Royal Mail's future on a long-term sustainable business" – arguably the most irritating statement of the lot as Royal Mail is already very sustainable with profits for the year at £403 million and set to rise to £460 million next year. Yes you read that correctly, the company is already massively profitable and was on course to be even more profitable before privatization.
Cable's statement is therefore 1st class tosh and 2nd class common sense.
Interesting to note that the Royal Mail's pension liabilities would have been an investor concern but luckily for the investors this debt has been kept on the public's books.
Essentially the soaring profits have been privatized while the debt has been nationalized.
The details of the sale are even more ridiculous, Royal Mail shares were sold off at £3.30 after UBS, Lazards and Goldman Sachs, who advised the government over the price, valued the firm at £3.3billion. Odd that JP Morgan informed the government that it would value the firm, including its debts, at £7.75billion to £9.95bilion yet the government seems to have ignored this valuation and did not raise any questions when faced with the enormous variation in valuation.
The government's agreement with the low ball valuation of Royal Mail is beyond belief. Valuations of companies do vary but there is only so much variance that can be reasonably expected as accountancy has well established rules and guidelines that should be followed.
Was the £3.30 a genuine but poor attempt at a fair valuation or was it the lowest “credible” price purely to increase the profits for the city institutions involved and to secure the votes of any retail buyers?
Adding insult to financial injury the government allowed for 67% of the "Base Offer" to be allocated to institutional investors and just 33% to be allocated to the public!
I originally wrote this piece a month after the float, the share price is now £6.00, almost double the price that Vince and his City chums sold OUR Royal Mail for.
Hang your heads in shame you government imbeciles.
iXDemocracy would prevent the scandalous selling off of our assets as it would be a simple matter to hold an online vote to decide if any privatization should go ahead. If the public did decide to privatise the relevant facts would be available and a price and procedure could be set using a completely transparent democratic procedure.

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