Royal Mail sell-off underpriced by £180m

18th December 2014

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The government’s privatisation of Royal Mail could have made an extra £180m, a report commissioned by Business Secretary Vince Cable has claimed.

The report led by former City minister Lord Myners concluded that the shares could have been valued up to 360p, 30p more than the flotation price, on the back of the high demand for the stock. The analysis however did go on to caution that if the £2bn initial public offering (IPO) price had been higher, it would have meant taking on “substantial” risk.

MPs have previously forecast that taxpayers lost out some £1bn in the 2013 privatisation.

Speaking on BBC Breakfast, Lord Myners said it was a “complicated transaction” and that “if any money had been left on the table it was pretty small”.

The report states while that a higher price could have been achieved it added that “the consensus appears to be that this was the order of 20p-30p per share… equating to proceeds to government at IPO of £120-180m”.

It adds: “For the avoidance of doubt, we do not believe that a price anywhere near the levels seen in the aftermarket could have been achieved at listing.

The value of Royal Mail shares surged went they hit the stockmarket in October 2013, rising by no less than 38%. As of 9:15 today, the shares in the FTSE 100 listed firm are trading at 398.7p, some 21% above their initial listing cost.

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