Let private investors have Royal Mail

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Sid wasn’t recruited to the 1980s privatisations to widen share-ownership. He was necessary because the flotations were too big for the institutions. But the public should now be given all the Royal Mail shares it wants.

If private investors want Royal Mail, let them have it. If they sell for a profit immediately, they’ll be more likely to back the next privatisation. If the institutions need shares to fill their index-weighted funds, they’ll buy from Sid and his co-investors.

It was the first BT share issue in 1984 that tapped into public demand. The City institutions said the offer was too big for them to buy all the shares so the government was forced to recruit the public too. By the time the ‘Tell Sid’ campaign was created for the British Gas sale, wider-share-ownership was being promoted as a virtue rather than a necessity.

It is the public’s choice whether it buys shares, but it is good for government that its citizens have savings and good for investors that they widen their portfolios beyond housing and deposits. The public can buy as a herd – the charge into Royal Mail shows that – but at least it is a different herd from the group-think that infects institutions.

And two different investment rationales help create a market in which there can be buyers as well as sellers.

The public have ignored the irony that for the first time they could apply on the internet for shares in a business whose mail deliveries are being undermined by the web. But the demand is there and the supply will continue with a further tranche of Royal Mail plus shares in Lloyds and Royal Bank of Scotland.

But for all those sales, and other privatisations, the government should satisfy the retail demand first and use the institutions to underwrite the issues.