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Royal Mail

Report finds Royal Mail was undervalued by up to £180m at privatisation

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By John Glenday, Reporter

December 18, 2014 | 2 min read

A report commissioned by business secretary Vince Cable has found that the Royal Mail was undervalued by £180m during its controversial £2bn privatisation.

Keen demand from banks and individuals meant the government could have achieved a price of up to 360p a share, significantly higher than the 330p a share actually charged, leading some to suggest that taxpayers lost out as a result of the deal.

Former City Minister Lord Myners, who authored the report, was cautious not to apportion blame however, pointing out that accurately pricing stock was a ‘complicated transaction’.

In his report Myners said: “the consensus appears to be that this was the order of 20p-30p per share... equating to proceeds to government at IPO of £120-180m. For the avoidance of doubt, we do not believe that a price anywhere near the levels seen in the aftermarket could have been achieved at listing."

Offering further comfort to the government Myners acknowledged the global economic uncertainty and threat of strike action which served to weigh on pricing decisions.

Shares in the postal firm soared to hit a peak of 615p following the flotation but have since sunk back to sit at 394p.

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