Royal Mail: was the sell-off undervalued by £6bn?

The Royal Mail sell-off appears an increasingly dismal deal for the taxpayer. Its been disclosed that investment bank JP Morgan told the Government it could flog the postal operation for close to £10bn rather than the £3.3bn the Coalition settled for on 11 October.

Postal workers union leader Billy Hayes wants business secretary Vince Cable sacked. Just another unproductive row? %VIRTUAL-SkimlinksPromo%

The Great Mail Robbery?

The JP Morgan £10bn price ticket was fixed to the Royal Mail before a wave of strikes, according to sources at the Department of Business, the Guardian reports. However the news of the valuation - JP Morgan was not a player in the privatisation programme - only adds to fire-sale worries.

"Vince Cable," says Labour's Shadow Business Secretary, Chuka Umunna, "has said that taxpayer value was 'central' to the government's strategy in selling Royal Mail but given the extensive consultation with institutional investors and banks which took place, both he and the Prime Minister have serious questions to answer."

"Crucially," he adds, "they must explain when the Government was made aware that the sale was so massively oversubscribed by major investors and why, having considered a higher price, they rejected that option."

Royal Mail shares currently sell for 532p, a fat +61.2% increase on the original offer price. Valuations can soar - and dive - fast. It takes time for the froth to settle. But there is clearly unease.

Future performance

So much too for market 'efficiency'. However the Department of Business claims that the future projections of Royal Mail's performance saw a median figure of £3.6bn given by nearly two dozen investment banks (and several pitched under that figure).

The National Audit Office will make its own judgement in due course.
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