Robin Hood in reverse : poor are set to suffer as RM floats

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James Moore: Robin Hood in reverse – poor are set to suffer as Royal Mail floats

Outlook: Critics of the planned listing reckon valuation could be £1.2bn light

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Royal Mail is the Robin Hood-in-reverse flotation, taking money from the poorest in society and handing it to the rich. This is not an exaggeration, nor do I intend to indulge in a piece of left-wing polemic. It’s just a fact. Here’s how you get there.

Your starter for ten is that the business has been woefully under-priced by the terrible twosome of Goldman Sachs and UBS, which stand to share in upwards of £20m in fees along with a battery of well-paid lawyers, PR consultants, accountants and other City flunkies (which is a substantial state-funded gravy train to begin with).

In fact, Panmure Gordon, the stockbroker, reckons that the official valuation of up to £3.3bn could be as much as £1.2bn light based on what other countries’ (mostly private) postal services are worth. It has also been argued, by Labour’s Chuka Umunna that the group’s property assets, a number of which are surplus to requirements, aren’t being properly reflected in the price at which the company is being sold off.

If you’re going to sell something to investors via the stock market, you have to let it go at a bit of a discount. Valuations are always open to debate. Put two analysts in the room and give them a company like this, and they’ll give you three or four different estimates for how much they think it’s worth.

However, there does seem to be a consensus emerging that people who subscribe for shares in Royal Mail are being offered an extraordinarily good deal even if the shares go at the top of the valuation range.

If you want evidence for that, just look at the demand. City investors don’t fall over themselves to get involved if they feel they’re being sold a pup. This is no pup. The queue of institutions stretches from the City, past Westminster and on into Mayfair and Kensington. Institutional fund managers love to play with loaded dice, and that is what the Government has handed them.

But it gets worse than that. Forgotten in all the fuss about the valuation yesterday is the fact that this is only happening because the Government took the Royal Mail’s under-funded pension scheme on to its books. That meant £28.5bn of assets (hooray) but long-term liabilities of up to £10bn more (boo). Even were the Government to revisit its valuation and get something close to the £4bn Panmure thinks the Royal Mail in its current shape is worth, taxpayers would still be losing out massively as a result of this.

A minority of the shares, it is true, have been allocated to retail investors. So relax. We can at least join the fun. But tickets for the cheap seats start at £750.

The City, meanwhile, will be travelling in club class. And the poor? Those who have disproportionately suffered from the financial crisis, the economic slowdown and the austerity that has followed on from it? As they tend to be generally more reliant on the state’s support than the wealthy, they are the big losers. As ever.