Many of you will now be shareholders of Royal Mail and I hope it will be very successful for its shareholders and employees – most of whom are now also shareholders.
Personally I think the privatisation of Royal Mail was long overdue and the ‘let’s hang around in the past’ attitude of many out there is simply an unwillingness to go with the times.
Of course there has also been a concerted effort by the press to show that the shares were undervalued and I am sure the case can be made that they were. The level of interest in the shares alone plus the nice increase in value on the first day would support this contention. Remember Facebook? They went the other way and there was less noise about them than about Royal Mail.
I cannot get excited by either Facebook or Royal Mail, though I am excited that markets are starting to work again and now comes the ‘but’. But in both these IPOs we have gone back to basics – feed the bankers as much as we can. It would have been so much cooler to do both through crowdfunding and it would have saved tens of millions, and allowed for the creating of hundreds of businesses.
Facebook’s new shareholders spent $176 million to get the company overvalued and no doubt Facebook negotiated hard so got a ‘good’ deal. This is on top of the $100 million made in shorting the stock and the billions made by Goldman and friends on shares they held (read more in Forbes).
So what were the fees for Royal Mail? Well that is not quite so easy to answer. I went through the Prospectus which has a section on this on page 16 – if I ever submitted a report like this to any board I have ever served on, I would be shot for lack of ‘transparency’ – and if I add it all up and understand it right, the costs were £56.9 million. This of course excludes any costs which Royal Mail and the government managed to internalise, which I expect would double this figure.
For the fees we get:
- A prospectus which I would guess less than 1% of the new shareholders have read
- Four pages of risk warnings which were ignored – I have not read them either, though I did see headers about IT systems and strikes
- A load of boiler plate stuff including something about the US and the State of New Hampshire (who the f..k are they? I thought this was a British IPO.)
- Underwriting of a stock which was undervalued (and I believe intentionally so as it was critical for the government that it would be a knockout success)
- Probably, but then I might be called cynical, a pile of bonuses for a bunch of bankers for the fees they took from the poor tax payers, the hard working people of Britain (or so the politicians continually tell us).
Had Vince C taken the process through crowdfunding he could have achieved a lot more and would have given the bankers a poke in the eye so to speak rather than their customary bonuses. We could have been rid of the rubbish of a boring prospectus, but some real effort on the part of Royal Mail to tell us why they deserved to go public.
In addition using crowdfunding Vince would have saved himself a fortune in unnecessary fees and best of all, it would have taken a new burgeoning industry into the stratosphere, helping many thousands of small businesses and employees in the future.
Sorry but you missed a real opportunity here Vince – after all, isn’t the difference between an IPO and crowdfunding really in the fees?
This blog appeared on Monday 14th October on www.crowdahead.com.