CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
☰
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
Open account
✖

Govt missed out on 180m in Royal Mail privatisation

Article By: ,  Financial Analyst
December 18, 2014 11:26 AM

The privatisation of the Royal Mail was significantly undervalued, according a new report.

Commissioned by business secretary Vince Cable, the review noted that the government missed out on £180 million for the £2 billion sale due to underpricing. The report states that shares of the postal service should have been valued by up to 30p more than the floatation price of 330p. The reasoning was that there was a high level of demand from banks and individuals.

While the report argued that there was lost revenue, former City minister Lord Myners, leader of the research, highlighted the difficulty of share sale. Speaking on BBC Breakfast, Lord Myners explained that increasing the share price would come with a "substantial risk" adding that it would be a "complicated transaction".

The privatisation of the Royal Mail is still one of the most controversial moves of its kind in history. Despite protests from staff, unions and politicians the 500-year-old service was officially sold off in 2013 sparking mass interest from investors. On the day of floatation shares in the Royal Mail soared by 38 per cent, making it the biggest one-day rise since British Airways was privatised in 1987.

Despite the report highlighting opportunities for the government to generate more funds for the taxpayer from the sale, Lord Myners maintained that the transaction was handled "with considerable professionalism".

Lord Myners said: "The sale was done against a backdrop of global economic uncertainty and a threat of industrial action, which go a long way towards explaining the cautious approach taken throughout the process.

"We found no evidence to challenge the general assertion that an IPO price greater than 350-360p could have been achieved and we accept that a decision to revise the range would have come with added uncertainty and risk. The right decisions were made."

Shares in Royal Mail opened 0.96 per cent up on Thursday (December 18th), hitting 398.00.

Find up to date information on the FTSE 100 and spread betting strategies at City Index

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. CFD and Forex Trading are leveraged products and your capital is at risk. They may not be suitable for everyone. Please ensure you fully understand the risks involved by reading our full risk warning.

City Index is a trading name of StoneX Financial Ltd. Head and Registered Office: 1st Floor, Moor House, 120 London Wall, London, EC2Y 5ET. StoneX Financial Ltd is a company registered in England and Wales, number: 05616586. Authorised and regulated by the Financial Conduct Authority. FCA Register Number: 446717.

City Index is a trademark of StoneX Financial Ltd.

The information on this website is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement.

© City Index 2024