There was a very intelligent letter in the FT today from a Dr Alex May. To quote: “I fear the sale will distort public perception of investing in shares”. It went on to suggest that it would mislead people into believing that making money in shares was easy, and implied it would encourage speculation rather than sound investment in a portfolio of shares.
Even more astonishing was the revelation on the front page that some investment banks valued it at nearer the 500p mark back in June, but those who bid a higher price were not awarded the mandate to handle the offer. It seems a Government official indicated these bidders were simply “ill informed” whereas the lead banks that were appointed knew a lot more about the business because they had been advising the Government or Royal Mail for some time.
As ShareSoc said in our recently issued newsletter: Retail investors could not know what the Government was going to decide on in respect of the allocation of shares, but it turned out many would get none. As a result most of the retail investors who were allocated shares were very small investors (i.e. the typical “Sids” named after the campaign for the original British Gas IPO). These were probably least able to judge the merits of the investment and many would certainly have been subscribing on emotional grounds or because they wished to make a quick few hundred pounds by “stagging” the issue. Those who retain the shares may end with an unhappy result.
Yes we certainly have the worst of all worlds as a result of this IPO. It will perpetuate the myth that the stock market is solely about speculation in the minds of the general public and politicians, while discouraging the creation of a sound retail shareholder base in this country.