A sacrificial session with Adrian Bailey and the Royal Mail – it went on well into lunch. I must have lost a pound. The tax payer lost 750 million of them.
The session wasn’t a grilling – these things never are – but there was grinding. Some battering from Brian Binley, urbane argumentation from the witnesses, the chairman well out of his habitat.
Poor fellow, head of the Business committee. He looks like a rough sleeper on a 99 Per Cent demo. Up against people who spend more on lunch than he earns. They live in a different world and speak many other languages than his.
Even the Royal Mail ministers – who, to say the least, appear to be in a vulnerable position – are beyond his reach.
He told Michael Fallon that the shares were under-valued at sale. Fallon – with imperturbable daring – replied, “I haven’t seen any evidence they were undervalued,” and added brilliantly: “Have you?”
Stretching to return this, Bailey said the accepted usual increase was 10 to 15 per cent, that’s what happened to shares in an IPO, that was normal.
Oh really? Fallon replied. Of 43 IPOs of the last few years half fell below the offer price and over half are still below the offer price. Facebook slumped. AO World surged 33 per cent and slumped to below the opening price. The uncertainties of the time, the threat of strike action, the US debt ceiling, all these things depressed institutional confidence (they said).
The committee wasn’t taking any of this in. Their assertion, they feel, is so strong it’s beyond argument. It doesn’t need arguing. Anything else is bizarre, ridiculous, Alice in Wonderland.
A 38 per cent price surge irresistibly means that the stock was issued at too low a price.
But they failed to make it stick. Even Brian Binley’s batwork, always a pleasure to watch, only got him half way there. Why, he asked, would you believe a customer when he tells you he won’t pay more for what you’re selling? They’ve got an interest in getting what you’re selling cheap. The book builders have an interest in getting the sale off.
All persuasive, but it needs evidence.
And you have Fallon, with Hannibal Lecter’s pulse-rate saying: “I haven’t seen any evidence institutions would have paid more.”
The chairman responded with two interesting remarks. The first was, “The NAO report identified four investors who would have paid more.” And then he followed this with, “I bring in Mike Crockart.”
Why, at the turning point of the argument did he veer away, give up?
No one on the committee was up to the standard of the advising bankers. When the Lazard’s man said, “It was an exercise in pricing not valuation,” and that the first year target price would be “priced back to the issue price”, no one had the knowledge, or agility or experience to dispute it. “If the target price was £3.30 we couldn’t have sold it at £3.30,” he said, and that was that.
All these points have been made before. It is the department’s case. Round and round the bush the committee went. It’s the familiar thing: institutionally, they just aren’t up to the task.
The ministers’ case is that Value for Money may yet be realised because the Government still holds a stake in the Mail that could be worth more than the whole company was worth five years ago.
What does the committee feel about that? Should the Government sell the shares now or sell later? If they’re so confident in their judgement of value, price, taxpayer return? They don’t know, and probably don’t know they don’t know.
Round Three tomorrow, with five of the implicated bankers appearing in front of Margaret Hodge, including one from GS – Goldman Sachs or Great Satan, depending on your preference.