So does anyone still think Vince Cable & co got the pricing of the flotation of the Royal Mail PLC (LSE:RMG) in 2013 right?

As you might recall, the shares were priced at 330p by the Conservative/Liberal Democrat coalition government and promptly rocketed to 455p on the first day of trading, costing the British taxpayer GBP750mln in revenue it could surely have done with in the miserable decade of (for most of us) enforced austerity.

To be fair, a looming postal workers’ strike put a severe dampener on the price the government could reasonably have asked investors to pay but even so it clearly got the pricing wrong, both in the short term and the long term.

That did not stop erstwhile Business Secretary Vince Cable claiming to be vindicated in 2019 by the shares plunging to about GBP2.

“What the share price shows you is that this wasn’t a very sound business. We knew that this was a business that was going to struggle,” Cable told the Sunday Telegraph, apparently still smarting from criticism that he and his advisors got the issue price badly wrong.

Well, if a week is a long time in politics then in the stock market, six years – the gap between the flotation and the time at which the shares were languishing at two quid – is an absolute (stock) flipping epoch. Traders who stagged the issue made an absolute mint while as it turns out, shareholders (who include a sizeable number of current and former Royal Mail employees) have done very nicely too.

“In a world of email, Postman Pat is as much a part of us as the stagecoach. In order to do that the Royal Mail needed to borrow – it wasn’t going to come from the government,” Cable said in 2019.

Goodness me. A government taking advantage of unprecedentedly low interest rates to invest in a business that is still fairly crucial to British daily life? What are the chances of that happening?

As it happens, pretty high. In 2020, the government seemed to find its borrowing mojo when the pandemic got its teeth into the economy and as a happy by-product for Royal Mail, accelerated the trend of people preferring to get shopping delivered to the home rather than venturing into town or to the edge of town retail estate for a bit of retail therapy.

I wonder whether Cable still feels vindicated now that the shares are trading above a fiver? That’s a 57% increase over seven years. I can’t think of many things that have gone up more over the same period except maybe the price of a first-class stamp.

To be fair, Cable could not be expected to have foreseen the coronavirus. If a man can’t foresee the backlash from breaking an electoral pledge to abolish university students’ tuition fees then his powers of prognostication are not going to extend to predicting a pandemic that risked bringing the global economy to a grinding halt but he might at least have issued a “mea culpa”.

Former Liberal Democrat party leader Nick Clegg has at least apologised for the party going back on its word. Apologies from Cable for botching the privatisation of the Royal Mail have been thin on the ground and with every week the mistake gets more egregious.

READ Royal Mail to deliver GBP400mln to shareholders as interim profits jump

Since the company announced last Thursday that it would return GBP400mln to shareholders – which no longer includes the government after it sold the last of its stake six years ago at 455p a share – the shares have soared from 438p to 518.2p.

The current share price gives Royal Mail a stock market capitalisation of just over GBP6bn. According to the Office for National Statistics, the government raised GBP3.3bn in total from the sale of Royal Mail.


Leave A Reply

Please enter your comment!
Please enter your name here