Do you remember Royal Mail’s “priority investors”, who were given privileged access to shares in the controversial stock market flotation last October? They got shares whilst more than 40,000 individuals who tried to buy shares in the privatisation received nothing at all. Only 30% of the shares made available went to the public, whilst institutional investors like banks, hedge funds, pension funds and sovereign wealth funds will be sold 70% of the ludicrously undervalued shares. How did it benefit the public to sell-off an institution that 100% belonged to them, and then only allow them to buy up only 30% of the shares on offer?
We were not allowed to know who the secret and privileged group of “priority investors” put above the public were at the time. Now they have finally been revealed by Vince Cable.
The business secretary revealed the names of the 16 shareholders, who were supposedly selected by Cable for their ‘long-term investor potential’ and given large allotments. There has been considerable controversy over why the business was priced so low despite demand being 24 times greater than the supply of shares.
It isn’t even as if they didn’t know or weren’t told about the undervaluation. Before Royal Mail stock began trading on the 11th of October 2013, the Labour party produced a report that claimed that by pricing the shares at 330p, the government were selling it off at significantly below the true market value.
The Labour analysis showed that the government had undervalued it by £1 billion (about 30%), whilst other city analysts have calculated that it had been undervalued by between £600 million and £2.7 billion (between 22% and 80%).
One of the key areas in which the Royal Mail was undervalued was the property portfolio of more than 2,000 locations across the United Kingdom, which was clearly badly undervalued at just £787 million. The Royal Mail sell-off prospectus lists several sites as beng surplus to requirements, including the 8 acre Mount Pleasant sorting office in Islington, which would be worth over a billion if sold for housing development. It should be no surprise at all that the private company will be allowed to keep all of the profits from the sale of property assets that were paid for out of public funds.
It is also worth noting that Royal Mail had been made more attractive to investors by separating the Royal Mail pension liabilities in order to keep them on the public books as the company was sold off. So the public got these debts so the private sector could be handed the profits.
The priority shareholders had 22% of the business at the time of its float last October, but 12 of the 16 sold some or all of their shares quickly and, by the end of January, just 12% of Royal Mail’s shares were held by the investors.
Cable previously attacked short-term investors like hedge funds as “spivs and gamblers”.
The National Audit Office revealed that many of the priority investors sold out their shares swiftly after the flotation, making huge profits within the first few weeks as the Royal Mail’s share price soared by 72% over the first five months, after being priced at a “cautious” 330p-a-share. The business’ share price increased by 38% on the first day of trading, with the taxpayer estimated to have lost out on £750 million.
The list features Kuwait and Abu Dhabi’s sovereign wealth funds, numerous hedge funds, including infamous speculator George Soros’ Quantum Partners. Another one of the firms, Lansdowne Partners, is run by Peter Davies, who was George Osborne’s best man at his wedding and a friend from Oxford University.
Sir Paul Ruddock, Lansdowne’s former chief executive, was awarded a knighthood after donating £500,000 to the Conservative Party. He said it was for his work with the arts.
Another one of the ‘priority investors’ offered cut-price shares in the government’s botched privatisation of Royal Mail are a major donor to the Conservative Party. Filings with the Electoral Commission reveal that asset management firm Fidelity Worldwide have given nearly £975,000 to the Tories.
Here is the full list, as released by the Business department:
• Abu Dhabi Investment Authority
• Capital Research
• Fidelity Worldwide
• JP Morgan
• Kuwait Investment Office
• Lansdowne Partners
• Lazard Asset Management
• Och Ziff
• Standard Life
• Third Point
So once again the public have been swindled and the friends and donors of the government have made a fat profit. The sale of Royal Mail was all about putting public money into private hands. Note also how talk of a free market works in reality. Even the laws of supply and demand were over-ruled here to ensure that the hedge funds and Tory donors got the shares and profits they wanted. The establishment is swindling us in so many ways that it is difficult to list them all. Are you going to keep voting for these pickpockets?
By Patrick Harrington