Dr Madsen Pirie's comments on Royal Mail sale featured in the IBTimes


Dr Madsen Pirie's comments on the sale of Royal Mail were featured in the International Business Times.

Read the article here

"The sale of Royal Mail was well handled," said Dr Masden Pirie, president of pro-free market thinktank the Adam Smith Institute (ASI).

"It was the first major privatisation in two decades, and the aim was not to raise the greatest possible sum for the government, but to turn a state-run corporation into a successful and flourishing private business."

When the government set the 330p offer price for Royal Mail shares it was following advice from investment banks Goldman Sachs and UBS.

Since the October 2013 flotation onto the London Stock Exchange, the shares have settled at around 565p – a 71% increase. Some banks have issued research notes putting the target price much higher.

Interestingly, Goldman Sachs analysts – who banking regulations dictate must be separated from the advisory division by a 'Chinese Wall' – put their target price at 610p. UBS analysts opted for a much lower 450p.

"No-one knew what the 'correct' price was for Royal Mail, any more than they did for BT, British Gas and the dozens of others," said ASI's Pirie.

"Since they had not traded in the private sector, or had to attract private investment, no-one knew how they would be valued.

"Government took expert advice knowing that it would be, at best, an estimate."

Pirie noted that the government "covered itself" by retaining a 30% stake in Royal Mail."