This morning, he accused the government of massively undervaluing the Royal Mail by pushing through a sale ‘prematurely’. In a letter to Vince Cable this morning, Umunna said the government is ‘ripping off’ taxpayers.
One of Umunna’s major bugbears is the speed at which the privatisation is taking place. Members of the public have until October 8 to apply for shares (the minimum amount they can buy is £750 – another issue for Umunna), and the IPO itself takes place on October 15.
‘An unusually short timetable has been set for the IPO process… without adequate time for scrutiny being possible in the House in advance of October 8,’ wrote Umunna.
That – on top of the fact that 70% of shares will go to institutional investors, rather than taxpayers – makes it ‘not at all clear’ that the government is securing the ‘best return for taxpayers’.
Another point he makes is the value of the Royal Mail’s property portfolio. The company has big properties all over central London, where the price of homes is rocketing. Experts reckon if Royal Mail turned them into flats itself, it could make over £1bn from them – but the company is currently marketing them in their undeveloped states, which will make it significantly less.
Although Royal Mail would make the argument that some aren’t necessarily appropriate for residential development. Its Nine Elms site, for example, is in an area where 16,000 homes already have planning permission. It has been the subject of rumours that the Chinese are sniffing around it as the site of their new embassy. Positioned right next to the site of the new American embassy, the area’s becoming increasingly desirable to foreign delegations, meaning the undeveloped site could be sought-after – and therefore valued higher – as an embassy.
Umunna closes the letter by mentioning a report by analysts Panmure Gordon, which ‘suggests that Royal Mail has been significantly undervalued, with the true value of the company being a third higher than the price the government for the sale’.
With shares priced at the top of the government’s range, the company will be valued at £3.3bn. The report suggests its value could be as high as £4.5bn. Those close to the deal reckon the flotation will be heavily oversubscribed, so the government could, if it were so inclined, raise the price of shares.
Not doing so ‘means the taxpayer may lose out to the tune of half a billion pounds,’ finishes Umunna.
It just goes to show quite how political privatisations can be. Some would call an over-subscribed float, with shares priced at the top of their range, pretty successful - but in the case of a public privatisation, the attraction to institutional investors is the fact that they have a bit of headroom. Obviously, though, keeping investors and the opposition happy was never going to be an easy task...