Prime Minister David Cameron came under pressure in parliament on Wednesday over his government's sale of Royal Mail with the Labour party accusing him of selling the firm off too cheaply to a handful of rich London investors. The government's handling of the sale of a 60 percent stake in the 500-year-old state postal operator last October at 330 pence a share has come under renewed scrutiny after the country's spending watchdog concluded the government had set the price too low. Labour has seized upon the flotation, and the quick profits made by big banks and City investors, to reinforce one of its central arguments ahead of next year's general election - that Cameron's government is out of touch with ordinary voters. "He sold at 330p and this morning the price was 563 pence," Ed Miliband, Labour's leader, told parliament. "It is basic maths. Not so much the Wolf of Wall Street more the dunce of Downing Street," he quipped, referring to the street where Cameron has his office. "A third of the shares were sold to just 16 city investors and there was a gentleman's agreement that those city investors wouldn't sell the shares," Miliband said.I say! I say! I say! Miliband certainly came up with a good one-liner: Not so much the Wolf of Wall Street more the dunce of Downing Street. Arturo will like that turn of phrase. I researched a bit further into the Reuter's article.
"What happened? Within weeks half of those shares had been sold and they had made a killing worth hundreds of millions of pounds. In other words 'mates rates' for his friends in the City. This is a sale nobody wanted and nobody voted for - a national asset sold at a knockdown price to make a fortune for the few."http://uk.reuters.com/article/2014/04/02/uk-britain-royalmail-cameron-idUKBREA310WB20140402 Some agreement! Some gentlemen! I decided to look up the definition of the phrase 'gentleman's agreement'. Here is what I found:
gentleman's agreement An arrangement or understanding which is based upon the trust of both or all parties, rather than being legally binding:http://www.oxforddictionaries.com/definition/english/gentleman%27s-agreement So this 'agreement' that they 'wouldn't sell the shares' was based on trust. Dodgy thing that! Who can you trust these days? Particularly anyone involved in finance! I ask you - gentlemen! So - who were these 'gentlemen'? Maybe the Business Secretary, Give-him-a-big-hand, 'InVinceable' Cable himself would know the answer. After all he was organising the 'deal'. Simon Jenkins in The Guardian wrote:
There was only one loser in this Royal Mail privatisation: the taxpayer: The Treasury was badly advised on the sale, relying on firms accused of unethical practices and corporate greedJenkins gave details about the negotiations.
A chief executive was hired, and by May last year the business engineered a 60% surge in profit. It was clearly being gold-plated. So why was it sold as tin? Cable chose Lazards, Goldman Sachs and five other banks to advise on the sale. As anyone who has witnessed these events will attest, they are carnivals of cash. Privatisation fees alone totalled £12.7m, according to the National Audit Office report. Since the banks advising on price are also placing shares with clients, Chinese walls are put in place to separate "sellers from buyers" within offices. But is this really possible in the City of London, where Chinese walls are most likely made of rice paper? Don't commissions and fees have money dripping from meeting rooms and wine bars, as bankers and lawyers sniff out the nearest and deepest trough?Yet more neat phrases: 'carnivals of cash' and 'in the City of London, where Chinese walls are most likely made of rice paper'. It certainly doesn't sound a place to find 'gentlemen!
Jenkins continued:
Within weeks of the sale, Goldman Sachs's own analysts were predicting a price of 610p, almost twice what the "advisers" had been advising. The government had been shockingly ill-advised. As the price went up past 600p, Cable kept dismissing it as "irrational exuberance, froth, speculation". He indicated everyone should wait until the price came down. It is now 562p. Worse, he had allocated bundles of shares to 16 City institutions on a "gentleman's agreement" that they would hold them as "a core of high-quality investors who would be there in good times and bad". Within weeks, over half this stake had been sold, and to precisely "the hedge funds and other speculators" that Cable had pledged to keep out. Just four of the 16 are still big shareholders. Cable was massively naive. On Tuesday he protested that he was merely showing caution against "risk of failure". I can hear the City laughing. As the head of the NAO, Amyas Morse, points out, had Cable been prudent when warned of an undervalued sale, he would have held back 49% of shares for the Treasury, as opposed to just 30%. Indeed, he might have held out for postponement and upped the price. As it is, he valued Royal Mail at £3.3bn – it should have been nearer £5.5bn.So - InVinceable Cable ain't quite as invincible as we all hoped!! What more did Jenkins have to say?
Cable was spending millions on advice from firms such as Goldmans and Barclays that have been widely accused of unethical practices and corporate greed. This was not cautious but reckless. As the NAO's Morse said on Tuesday: "The price was borne by the taxpayer."http://www.theguardian.com/commentisfree/2014/apr/01/royal-mail-privatisation-taxpayer-loser A dog's breakfast you might say! I'm sure that's what Arturo would say! And we all know how he feels about dogs and 'gentlemen'! Certainly, we'll be keeping our eyes open for more gold-plated Porsches and empty bottles of Veuve Clicquot Ponsardin floating around the place. Meanwhile our dear old Postie is stuck with his shares! He and his mates can't sell them for years - unlike the 'gentlemen'. "C'est la vie!" Arturo said, when I showed him the various news items, I'd found. "So - it's 'Gentlemen prefer Bonds', is it, mi old pal? Never trust 'gentlemen' like this lot! After all..." Arturo paused for effect. "After all - what is politics but institutionalised lying?" So it would seem! Never trust a gentleman! We're going to nip into the kitchen of the Athenaeum tonight - just to see what's cooking! Bye
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