General Chat

The Business Secretary Vince Cable must be ageing rapidly as he struggles to come up with words to embellish the explanations he has so far given in defence of the 330p per share flotation price of Royal Mail. on a day when shares in the company briefly touched £5.

It has been reported quite widely that in a letter to MP's that although he considered value for money was important, it was about more than just the level of proceeds received on the day the shares were floated.

He also said that the threat of industrial action was a factor that influenced the initial price range as some city investors had stated that they were not willing to invest at all and others had intimated they might be reluctant to invest in Royal Mail as they were uneasy about the financial implications that might arise from any strike action.

What the Business Secretary Vince Cable has not alluded to while he wriggles and squirms in his attempts to justify, what I can only describe as a Fire Sale of Royal Mail, is that the business was valued by investment banks at up to £5 billion in June of this year, 50 per cent more than the price at which it was sold. At least two investment banks involved in the bidding process to select the underwriters for the flotation, had said they considered a maximum flotation price of around 500 pence per share was realistically achievable.

These latest revelations will put pressure not only on the Business Secretary Vince Cable but also the Chancellor George Osborne to come clean about the discussions on the Royal Mail flotation that took place behind closed doors with all the interested parties - including hedge funds managers such as Lansdowne Partners.

No amount of spin, decoration, or fancy embroidery will alter the view I have about this flotation because the more I read about this privatisation the more I am convinced that it was sold on the cheap and had nothing to do with getting a good deal for the British taxpayers.

News today.

Shares hit 500p on Friday, valuing the company at £5bn - up £1.7bn from the initial price offered last week.

Cable tells media it is all "froth". Well, I wish I had bought some and could now enjoy a bit of something light and airy. Bollinger perhaps :-D

From today's Dail Telegraph ( not the Daily Star )

"The answer, I think, is this: what is happening to the middle class is happening to 99 per cent of the rest of the population, too. Anyone outside the gilded 1 per cent is seeing their relative position decline. That’s an awful lot of people looking ahead and seeing less, rather than more, on the horizon. And, no matter what class you belong to, that’s not a healthy prospect for anyone. "

http://www.telegraph.co.uk/lifestyle/10377807/Well-never-have-it-so-good-again.html

With age I have become synical (spelling) and no matter what we the public want does not happen, that it is pointless saying anything because it doesn't make any difference.
Everything boils down to profit or jobs/ contracts for " the boys " :-|

RolloTheRed - Interesting you mention prime property sites Royal Mail has in London and other major cities, lots of assets for the taking there.

The firm I worked for rented the whole of the ground floor in a five story new development in the heart of Bromley, the ground floor was an office suite.

The other four floors consisted of some 20 apartments which are currently selling between £250K & £360K. The development is a stones throw from Bromley North station and is within 5 minutes walk of Bromley town centre, it also has a secure underground private car park - it was a derelict piece of industrial land prior to being developed.

No prizes for guessing what sits right next door to the above development which covers a slightly larger area, you got it, the main Bromley Royal Mail sorting office - do you want to take bets how long it will be a sorting office ;-)

The issue price of £ 3.30 was about right valuing the business as a going concern. I wish the posties the best of luck in maintaining real value in their pension fund!

There is a lot of speculation built into the current price for those able to actually trade. It is based on two factors (a) a takeover by a foreign outfit sooner rather than later and (b) the RM has a lot of prime site property in London and other major cities. The value of the property once released from RM usage has not been taken into account by Vince Cable and his merry men.

Most likely the company will be gutted and turned into something like TNT sooner rather than later.

For those who don't like posties taking short cuts it probably won't be long before the UK joins the rest of the world in collecting post from a box convenient for the mail carrier. The letterbox will cease to have any postal function.

The more I watch the share price of Royal Mail the more I side with those that say it was sold on the cheap - a rushed fire sale.

Today Royal Mail shares were trading at 480.50 pence per share which is 150.50 pence above their initial flotation price of 330 pence, that is an increase of about 45.6% - a lot of people, especially the big city investors and hedge funds are making a fortune out of this, not so the employees of Royal Mail who got free shares, they have to wait at least three years before they can sell them.

How about UK Mail? Already taken? Interparcel? Parcel2go

No doubt they are removing Royal from their title as we write and thinking up a jazzy new name with a jazzy new logo, new vehicle livery and new uniforms.

Sovereign Wealth Mail Services ;-)

Loved the way foreign firms could have as many shares as they wanted too. I can only presume it will no longer be called 'Royal Mail'.

maggiewinchester - I commented on the connection between the Chancellor George Osborne and Peter Davies of Lansdowne Partners in my post at 08:29am yesterday.

Spokesmen for Lansdowne Partners and the government have vigorously denied anything improper took place, I do not think that Joe Public will agree with them, they will plump for the "no smoke without fire" and "you scratch my back and I'll scratch your back" theories. It also gives the impression that when the Chancellor says "we are all in it together" what he's saying is "they (my friend and myself) are all in it together" ;-)

My own view is that when government sells or puts out to tender any state asset or service, any organisation whose senior executives have close relationships with any government minister or senior government official, those organisations should not be allowed to partake in the sale or bidding processes.

Silly me, just realised that would stop the sale of all state asset and privatisation of services ;-)

Just noticed this in the Daily Mail -yes, it really was the Daily Mail!!

http://www.dailymail.co.uk/news/article-2455653/George-Osbornes-best-man-Peter-Davies-make-millions-Royal-Mail-shares.html

Sort of explains why it was rushed through - before they lose the next election!!

Elucidating comments below the article as well.

A bit off topic, but aren't posties supposed to use your drive and not take short cuts across the front of your premises? There is an 18inch drop to the house next to us retained by slabs concreted in upright. The postmen over a few years have pushed this slab forward now and before long it will collapse and guess who will have to pay for it to be repaired. Being a bungalow I don't like people walking past the bedroom windows. Surely when their rounds are timed it is done without these shortcuts across people's gardens?

I can see more and more 'letter post' becoming 'email' and an increase in parcel post due to the increase in internet purchases. Click and Collect seems to be on the increase too.

I bought shares but was disappointed at the limit on them. All the work now to return money to those who oversubscribed because no-one said what the limit was. The folk who wanted over £10,000 worth got nothing........doesn't seem a very fair way to have dealt with it.

The Pension deficit in Royal Mail was actually caused by the government,

They allowed a Pension Break to RM because there was at the time so much money in funds it was a viable thing to do. But then the government allowed this break to continue for far too long, thus the deficit came into being.

And the Posties have yet to receive their share certificates!

And now the Post Office has been privatised will they still have to make their annual multimillion pound payment to the government?

I heard that on the news, and I can see merit in some form of public ownership of energy supplies - where say social housing landlords bulk purchase gas & electricity and sell it on to their tenants.

Getting back on topic of Royal Mail flotation - one rule for the Royal Mail employees who received free shares and another for the investors who purchased shares, eligible employees, who receive free shares through the Royal Mail Share Incentive Plan, cannot sell their free shares until at least three years after they receive them.

I suppose in government spin that is what is called a level playing field ;-)

I hope you will not berate me for going off topic, OFITG.

But this thread has been a bit of an eye opener. Did not realise this VAT windfall to Chancellor, neither did I realise that Lansdowne or anyone could get that many shares in the flotation.

What I have noticed is that the second most important party in Wales (Plaid Cymru - Party for Wales) has their conference today in Llandudno. And I think they are floating the idea of public ownership of energy. It is ridiculous that in both Scotland and Wales we have a surfeit of energy, yet we are now paying more than south east England for gas and electricity.

It is not too much of a leap to see suggestions that the Welsh Government take other public services and utilities into public ownership (Cardiff Airport is already owned by Government).

I am not a socialist myself to any great degree, but Wales is quite a socialist leaning country. Labour is in power - that is almost a given now. Plaid Cymru and Lib Dems line up with them in most key decisions. And I would rather live in Wales than England, particularly if the Tories get in again in 17 months.

VAT or no VAT, I have no doubt that, sooner rather than later, postal charges will increase, the question is when and by how much.

I would also love to know, who knew what, about the discussions on the Royal Mail flotation that took place behind the closed doors of government offices as I found it interesting to read that Lansdowne Partners, one of the world's biggest hedge funds, has acquired a £50million stake in Royal Mail.

Lansdowne Partners co-head of developed markets strategy Peter Davies, a member of the hedge fund's management committee, has been friends with the Chancellor George Osborne since they met at Oxford University, and George Osborne chose Mr Davies to be his best man when he got married in 1998.

There is a long connection between the Conservative Party and Lansdowne Partners as Sir Paul Ruddock, Lansdowne's former Chief Executive, was awarded a knighthood in last years honour list. Apparently his knighthood had nothing to do with his donation of £500,000 to the Conservative Party, he said it was awarded for his services to the arts.

Thousand of people who tried to buy shares in Royal Mail received no shares at all, however City institutions such as Lansdowne Partners were able to buy nearly 70% of the shares that were on offer, and once trading in the shares started the percentage owned by city investors, has probably increased quite substantially.

On one side of the equation, those who got only the minimum of £750 of shares and sold them when trading opened, probably made a profit of around £280 - on the other side of the equation the city investors made millions of pounds - all right for some ;-)

The biggest problem is they have given away Royal Mail but the Government has accepted responsibility for the Pension deficit which will lumber the poor Taxpayers with a debt of many millions of pounds for years to come.

well spotted!!!

I did not see this widely publicised by the Chancellor George Osborne, the Business Secretary Vince Cable or thee Business Minister Michael Fallon, when they were promoting the advantages of privatising Royal Mail.

As it is now in the private sector, as opposed to the public sector, there is a strong possibility that at some point in the foreseeable future that, under EU rules, VAT will need to be levied to the cost of postage.

Currently, Royal Mail as a public sector company, does not charge VAT, that has upset a lot of Royal Mails competitors as they have to charge VAT.

If Royal Mail has to charge VAT on the services they provide this will see postal charges increased across the board, by whatever the rate of VAT in place at the time a decision is made, currently VAT is 20%.

This will be a nice little earner for the Chancellor, and will be one more thing that affects the cost of living.