Pricing an IPO is obviously a tricky business. Too low and you risk missing out on millions in investment, too high and investors might not buy any shares at all. The decisions made in the run-up to the sale of Royal Mail have dogged Vince Cable ever since, after shares jumped 38% on the first day of trading.
Today the Myners report, which Cable commissioned, is a mixed bag of news for the business secretary. The headline figure is that taxpayers have missed out on a potential £180m because the initial share price of 330p was 20-30p lower than it could have been.
Not fantastic news, but much less than the £1bn some Government critics estimated and Myners said the price couldn’t have been vastly higher than it was already set at due to uncertainty surrounding the float - though he did suggest that future sell-offs should be more transparent. In fact, the former City minister was full of praise for the Government.
‘I regard the Royal Mail privatisation to have been a complex exercise executed with considerable professionalism,’ he said. ‘Many previous governments attempted to sell but failed. 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.’
Myners did not criticise the advisers involved in the deal, who have been under fire for profiting from the low price. Clients of Lazard made £8m and those of Goldman Sachs made £12m, and UBS is also thought to have benefitted. All have denied a conflict of interest, insisting that 'Chinese walls' insulated the separate parts of their businesses.
The report is unlikely to silence the critics. £180m is still a lot of money and Labour’s response this morning highlights the 'damning indictments' of the sale previously offered by the National Audit Office (which estimated the Government lost around £750m on the sale) and the BIS select committee and claims that Myners’ remit was too narrow. Chuka Umunna, the shadow business secretary, said, 'Lord Myners and his panel still conclude the taxpayer could have missed out to the tune of many millions of pounds.' (No, really?)
Still, Vince Cable is likely to be feeling pretty pleased with himself this morning.