- Last night, they closed at £5.61, which is 70% higher than the original price
- Asked about rising share price at the time, Cable said: ‘You get an enormous amount of froth… in the aftermath of a big (flotation) of this kind’
When Royal Mail’s share price soared after privatisation, Vince Cable dismissed criticism that it had been undervalued and said a proper view could not be taken for three months.
Yesterday – three months on and with the shares worth 70 per cent more than the Government’s sale price – his words came back to haunt him after MPs said taxpayers had been short-changed.
Both Conservative and Labour MPs rubbished the Lib Dem Business Secretary’s claim last October that the instant share price rise was just ‘froth’.
Tomorrow is the three-month anniversary of the flotation of Royal Mail which has joined the elite FTSE index of Britain’s 100 biggest companies. The shares were last night worth £2.31 more than the original price.
Labour MP Adrian Bailey, chairman of the Business Select Committee which is investigating the sale, said: ‘Froth does not keep bubbling for three months.
‘I think it is reasonable to assume that the shares are at the price which reflects the value of the company.’
The Royal Mail sale was priced at £3.30 a share. But it was hugely oversubscribed and on October 11, when stock market dealing began, the shares rose so rapidly they never traded at this price.
Last night, they closed at £5.61, which is 70 per cent higher than the original price.
Asked about the rising share price at the time, Mr Cable told the BBC: ‘You get an enormous amount of froth and speculation in the aftermath of a big IPO (flotation) of this kind.
‘It is of absolutely no significance whatsoever. What matters is where the price eventually settles.
‘If we look back at this in three months, six months’ time, or indeed years to come, that’s what we’re really interested in.’
Brian Binley, a Tory MP on the committee, said: ‘I do believe it was sold off too cheaply. The price should have been higher. The City has again let us down.’
Selling the shares for £3.30 each made the Government £1.7billion. If they had been priced at last night’s £5.61, it would have made £2.9billion, an extra £1.2billion.
Chuka Umunna, Labour’s business spokesman, said: ‘Three months later, Vince Cable’s dismissal of the sharp rise in the share price as froth has been demolished. It increasingly looks like the taxpayer has been left short-changed.’
The National Audit Office is conducting a value-for-money investigation into the privatisation. Results are expected in spring.
Mr Cable told MPs after the flotation that the banks which advised the Government on the sale had warned that increasing the price above £3.30 would be unwise.
Tory business minister Michael Fallon added: ‘It became very clear to us that there was a point at which institutional investors would not invest.’
Last night, the Department for Business did not comment on the MPs’ criticism.”(http://www.dailymail.co.uk/news/article-2536810/Proof-Royal-Mail-shares-DID-cheap.html)