Royal Mail Shares fiasco

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SAINTS AND SINNERS


In its wisdom, the Government has decided today that all retail investors in Royal Mail will get £750 of shares priced at 330p - unless they applied for more than £10,000's worth, in which case they will get absolutely nothing.

Why? Because the 30 per cent earmarked for retail investors was oversubscribed (700,000 people wanted a slice of it, Vince Cable revealed yesterday).


It raises some very awkward questions for the Government. Who are the deserving and undeserving retail investors? Why did HMG choose £10,000 as the cut-off? Are we now to believe that some people seeking to profit from Royal Mail are good and others bad? Why is Mr Smith, with his £40,000 saved up and ready to invest, being punished just so that "Mrs Miggins" (as a Government source put it) is able to buy her £750's worth? It sounds suspiciously reminiscent of Ed Miliband's predators-vs-producers view of good companies and bad companies, a moral schema which the Coalition once firmly rejected.


If ministers are now going to differentiate between saintly ordinary investors and sinful speculators, how do they propose to justify a flotation where 70 per cent of shares were reserved for institutional investors, a group not often regarded as either saintly or ordinary? Is a private citizen who has saved enough to be able to invest £40,000 in Royal Mail shares really less deserving than hedge funds and investment banks?

Something tells me ministers are going to need a very good answer to that question...

Hedge fund investing in Royal Mail employs George Osborne's friend

A hedge fund that employs one of George Osborne's closest friends and best man is among the City institutions set to make millions from the privatisation of Royal Mail.







730,000 members of the public bid for more than £750-worth of shares in Royal Mail before Tuesday’s deadline Photo: ALAMY







By Steven Swinford, Senior Political Correspondent

10:00PM BST 11 Oct 2013



91 Comments





More than 40,000 people who tried to buy shares in the privatisation have received nothing at all. By contrast City institutions were able to buy two thirds of the newly privatised company.


Lansdowne Partners, one of the world's biggest hedge funds, has invested in Royal Mail and is said to have a £50million stake in the company. After a day of frantic trading the value of its shares has risen by £18million.


Peter Davies, Lansdowne's co-head of developed markets strategy and a member of the hedge fund's management committee, has been friends with the Chancellor since they met at Oxford University.


Mr Osborne chose Mr Davies to be his best man when he married Frances Howell in 1998 at St Margaret's Church, next to Westminster Abbey.


The Labour Party highlighted the connection between the two men as part of its criticism of the Royal Mail sell-off.



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A Labour source said: "By selling off the Royal Mail on the cheap the taxpayer was short changed while hedge funds and friends of the Chancellor are set to rake it in. Once again this government puts the wrong people first."

A Conservative spokesman said the allegations were "completely untrue". "At no point was George involved in, or even made aware of, the allocations," a spokesman said.

Lansdowne Partners made a reported £100million from the financial crash by betting that the price of Northern Rock would fall. The practice, known as "short selling", has been heavily criticised by MPs and ministers.

Sir Paul Ruddock, Lansdowne's former chief executive, was awarded a knighthood last year after donating £500,000 to the Conservative Party.

In an interview last year, shortly before stepping down, Sir Paul denied that his knighthood was anything to do with the donation and stressed that it was for his services to arts.

He also disputed claims that Lansdowne had made £100million from short-selling shares in Northern Rock, claiming that the actual amount was only a "small fraction" of the figure.

A spokesman for Lansdowne Partners said: “Lansdowne is a highly respected, long term investor in UK and international businesses on behalf of our clients which include numerous UK pension funds.

“Our commitment over many months to this long term investment opportunity, and the process followed, have been identical to those in many other IPOs. Our interaction has only been with the company management and its advisers.”

The Government refused to give any shares to private investors who bid more than £10,000. It emerged yesterday that 17 tried to bid for more than £1 million.

Unsuccessful investors will only get their money back on October 21, meaning the Government could be earning £300,000 in interest by sitting on the cash.







Leading fund managers yesterday raised concerns that that British funds had lost out overseas investors. One manager, who did not want to be named, said: "We manage some of the best performing unit trusts in the UK, where ordinary people put in £50 a month in regular savings. We are accessible to all, but we weren’t deemed good enough by the book runners for Royal Mail shares, despite asking for over £50m in the flotation."

Sovereign wealth funds in Abu Dhabi, Kuwait, Singapore and Norway are thought to be among those who have been allowed to invest in Royal Mail.

The shares on the first day of trading rose one third in price .