Royal Mail Shares: Business Minister Accused of Having NO Business Acumen
ROYAL MAIL SHARES: BUSINESS MINISTER ACCUSED OF HAVING NO BUSINESS ACUMEN – It is standard business practice to undertake ‘due diligence’ when either buying or selling a business and you would think that Business Secretary Vince Cable would have carefully examined every aspect of the Royal Mail sell-off; but apparently not.
Royal Mail shares sold at just £3.30 but are now worth £5.65; this is a far cry from the original valuation that some MPs are calling gross negligence on the part of the Business Secretary.
Vince Cable’s decision to hire Goldman Sachs to advise on the Royal Mail sell-off is being labeled as akin to giving the Great Train Robber Ronnie Biggs a job with Securicor after it was discovered that Goldman Sachs was currently being sued for under-valuing a toy company.
Mr. Cable has in a Business Select Committee meeting said that the ‘buck stops with me’; going on to say that he would take full responsibility.
Mr. Cable’s statement however doesn’t carry any weight, for whilst this debacle might result in him losing his Ministerial post he certainly doesn’t have the financial means to balance the books.
The business select committee could do nothing other than express their deep astonishment as to how a Business Secretary could have failed so spectacularly at valuing the Royal Mail in which potential billions of pounds were lost for the Treasury.
Goldman Sachs was in fact not the only investment bank that dealt with the valuation; UBS was also responsible for checking and double checking the potential market valuation but the select committee has stated that both were ‘sizably wrong’ considering the Royal Mail was valued at £3.3 billion and yet a few weeks later carries a value of £5.65 billion.
“I find it quite astonishing that something that was publicly available on Google should be understood closely involved in the process.
From outside I have to say that appointing Goldman Sachs on a flotation given this court case is a bit like asking Ronnie Biggs to have an appointment at Securicor.” Committee chairman Adrian Bailey
Questions are now being raised as to why Mr. Cable was unaware of Goldman Sachs legal dispute with another company, eToys Inc, in which it complained of being notably undervalued; such appointment should have undergone due diligence.
Last month eToys Inc agreed on a settlement of US$7.5 million against Goldman Sachs over the 1999 valuation.
Shares at Royal Mail are now trading some 70% above its valuation by Goldman Sachs and UBS leaving the Treasury considerably out of pocket and whist Mr. Cable appears willing to accept full responsibility, it is plainly obvious that the austerity strapped taxpayer has been short changed over the IPO.
Royal Mail, as it continues to rise in value, is likely to be admitted to the FTSE 100 Index in a reshuffle scheduled for next month; leaving Mr. Cable exposed to further criticism over the IPO.
According to the latest financial reports Royal Mail’s operating profits almost double for the six months to September; resulting in £283 million for that period. The rise in profits is a significant amount compared to the previous six month earnings of £144 million; the profits boost was also attributed a VAT credit of £95 million and lower than expected operating costs.
Despite all this information Mr. Cable remains adamant that both Goldman Sachs and UBS did not act illegally and that the sell-off was in fact an excellent result for the taxpayer; Mr. Cable remains strong in his position that the IPO was very professional, well organised and a successful operation – that’s if you can call losing out on over £2 billion a successful business transaction.