Bankers to argue Royal Mail float was transparent

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BANKERS summoned to give evidence to the Business Select Committee tomorrow are expected to argue they would have risked the flotation of the Royal Mail collapsing if they had tried to re-price it upwards at the last minute.

They will also argue, according to friends, that far from being an opaque process as the chairman of the committee has already claimed, it was fully transparent.

The government was kept in the picture the whole way through the so-called book-building exercise, say friends, when advisers to a new issue determine the levels of support for a share issue.

“They knew exactly what the institutions were saying and what price would put certain funds off,” said one person close to the key bankers at UBS and Goldman Sachs, James Robertson and Richard Cormack. “And they relayed all this to government.”

Those sympathetic to the pair say recent price falls for newly-listed companies, including Partnership, Just Retirement and Tinkoff, demonstrate the perils in pricing too aggressively.

[the deliverer]

MPs question bankers who provided valuations of the company before the flotation.

Watch Parliament TV live here:

Royal Mail Privatisation
Witnesses
Citibank, Deutsche Bank, Goldman Sachs, JP Morgan, Panmure Gordon, and UBS

Visit the Committee's homepage.

[the deliverer]

10.40am
From the Guardian:

We've moved onto a key issue -- whether the threat of industrial action pushed down Royal Mail's float price.

UBS's James Robertson says that the "appetite" for Royal Mail shares had been coloured by the prospect of a strike.

So how much did you change your value by?

The strike threat affected the view of what they were prepared to pay and it set the range of 260 to 330

By how much?

It's hard to say.

Did you feed this back to Vince Cable?

Yes, says Goldman's Cormack.

10.41am
UBS's Robertson adds that from September onwards the threat of a Royal Mail strike over pay was the main "risk factor" hanging over the IPO.

So we missed an opportunity to hold up/stop the privatisation of Royal Mail?

[freelunch]

BBC reports on the hearing:

Gert Zonneveld from Panmure Gordon talks about his valuation of Royal Mail. He says he warned a week before the privatisation that Royal Mail was being undervalued, but was branded as an "outlier" by Vince Cable.

Gert Zonneveld from Panmure rejects Vince Cable's notion that Royal Mail share jump is "froth".

Parliamentary hearing on the privatisation of Royal Mail reveals that the seven banks involved in the Royal Mail privatisation were paid a total of £13m for their work.

[the deliverer]

"Take Royal Mail. It's now a truism that it was undervalued. Shares sold for 330p are now selling at 550p – a total difference in market valuation of a stonking £2.2bn. That's money the taxpayer missed out on".

Not surprising that this grilling of the bankers was not reported on BBC tonight, don't want to upset the plebs!