That's the spin put out on the media. I wouldn't mind at all. I would want the highest price possible for the taxpayer.
I suspect you're missing the most important/'obvious' point. Nobody knew what that magical price was.
An IPO failure results in the seller achieving a price of zero, or a very low price. The government swapped the risk of getting very little for a guaranteed price that might have been too low. In retrospect, it did. But decisions like these are much easier to make with hindsight. Good luck the next time you have a multi-billion pound business to sell off and public scrutiny of your every move.
The government swapped the risk of getting very little for a guaranteed price that might have been too low.
I suspect you're missing the most important/'obvious' point. Nobody knew what that magical price was.
There was no such risk given several 'reputable' banks valued it much higher.
I don't see why the Royal Mail had to be a quick cheap sale.
And they came out and said so beforehand? Oh, wait, no, they didn't.
You wouldn't go to a dentist and complain about your foot. I've never been asked to value a share in my working life and I'd decline to do it if I was. Equally, I wouldn't go to an investment analyst and ask them to price an insurance contract.
I agree Calum, however there are Actuaries who specialize in Investments and work at Investment Banks and this kind of staff will just require them to apply themselves a little if they price more Derivatives than equities daily say.
Yes, quite agree with this. My point is more generally about acting within your competence, but of course there are plenty actuaries for whom this would be bread and butter stuff.
The market determines the price. So get people to secretly bid for them and sell to the highest bidders.
That's the thing, pre IPO there is no objective 'market'. The market is determined OTC by visiting large finance houses and getting their views. The highest bidder is unlikely to have appetite to take on the entire issue and so the price will have to drop until the total amount sought is reached.
Question for you: If you were prepared to pay £2X but realise others are only paying £X what would you (the highest bidder) pay?
Addressing your final point about secret bidding:
Here's the thing; the IPO process has been long established; the Government lack the experience & expertise to force through a non-standard IPO approach.
The big issue with the Royal Mail process (which I believe you are likely to agree) was the fact that they didn't revisit the table once they saw it was 24 times oversubscribed.
That should have been a BIG hint that the price was too low!
None of these excuses convince me. They sold assets at a knockdown price to their City mates for a quick profit. Taxpayer loses out. If that oversubscribed then highest bids should get. I completely reject excuses the Govt 'lack experience and expertise' as they could hire a bank to sort it out for them. Clearly they were more interested in a cheap sell off to their City mates.
It's obviously in those banks interests to be "conservative" with their figure, so that they can pick up lots of shares at a cheaper price.
I'm with muguono, I think it's more a case of the politicians being taken advantage of by the banks rather than some plot by politicians to take taxpayer money for themselves.
But either way, in the grand scheme of things it's small potatoes. Our government spends £2bn a day, the fact that some IPO has cost taxpayers a few hundred million is really a rounding error on total annual spend.
That's corrupt.
No it's billions. JP Morgan valued it at almost £10bn but sold for £3.3bn.
My whole point in this thread is to ask: Where were Actuaries? Was anyone from our esteemed Profession involved in this? Why couldn't our Profession have offered more sensible valuations than the corrupt banks?
It's business. Yes it's also highly unethical but that doesn't mean it doesn't happen though.
And the current market cap is £5.5bn (which is what the market views it at, not one individual bank), so if they had used JP Morgan's valuation then they probably wouldn't have sold any shares at all.
Investment banks are the experts in valuing companies, the profession could have made an attempt at producing "better" valuations but I doubt anyone would have paid attention to us over investment bankers.