Another day and another public asset (this time Royal Mail) sold off on the cheap, so investment institutions can make a quick buck. Private investors have been limited to £750 worth of shares and nothing more, no matter how much you applied for. It only gets worse for private investors (those who may have invested their savings and pensions) who wanted to take advantage of the 6% interest rate on dividends, because if you applied for more than £10k worth of shares you got nothing.
Yet, here is the kicker. That would be acceptable and highly agreeable if all the shares were going to private investors, just ordinary members of the public. They are not, with a staggering 69% going to 'shadow banking' who will not be limited in the amount they receive.
So why the £750 limit on public investors? Simple - the government expects them to sell and make a quick profit, leaving the investment institutions to buy the shares back at a lower rate than they should be. On the first day of proper trading (16 October) shares leapt to £4.90, as members of the public tried to sell their stock. By the 28th of October they had risen to £5.55. According to Panmure Gordon, the only broker to speak out about the government's undervaluing before the sale, reckon they could leap to £5.70.
This means that the company (if only using the first day trading price) was unvalued by £1.6billion by the government. This government often likes to focus on those who claim benefits, as people who are always out to cheat the system. This undervaluation will cost the taxpayer MORE in three days than benefit fraud does in a year.
This is a sale for investment institutions, as ministers tried to raise the value of the company at the last minute but were warned off by investors who threatened to pull the plug because they wanted it on the cheap. They know the government artificially inflated the profits of Royal Mail by doubling the price of stamps and stripping away the pension fund. And, to keep it profitable, services will suffer.
The Business Select Committee is rightly worried that Royal Mail may lobby Ofcom to lessen its 'Universal Service' obligation. The obligation that means you can send anywhere in the UK. The Royal Mail is now a private company. It has a duty to its shareholders to maximise profits. It will likely maintain 'Universal Service' but will introduce undulating price differentials that could make it impossible for most to send to certain parts of the UK.
It is another piece of family silver sold on the cheap, so that a future government will never be able to buy it back. It will hit small business and rural areas hardest - the people this government considers its supporters.
It should have stayed public.
Beware - the shadow bankers are stepping out.