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The Royal Mail Mispricing Fiasco

Don't blame the government bureaucrats--it's on the banks that handled the IPO--Goldman Sachs, UBS, Barclays and Merrill Lynch, with Investec, Nomura and RBC Europe as lead managers, and Lazard who advised the UK government--

Governments Make Lousy Traders - Bloomberg View: "... The real question is how did these banks and the brilliant people who work at them get the IPO pricing so wrong? Every newly public company -- along with investors who buy the shares -- wants to see the stock rise after it starts trading. But to misjudge the potential for appreciation by a factor of almost 50 percent in less than a year after the offering demands some kind of explanation... The Business Committee has made a decent effort at providing one. "Fear of failure and poor quality advice led to a significant underestimate of the demand for Royal Mail shares," the committee said in a statement... Royal Mail was the biggest share sale in Europe since April 2011, when Glencore Xstrata raised $10 billion. Maybe it's understandable that after such an extended period of time with not much to practice on there was a fear of failure. It's the second part of the committee's accusation -- the chastising of Cable -- that should receive more attention because it is largely misplaced.... That's why all those shiny investment banks were hired -- for their alleged deal-making expertise. In the nine months leading up to the Royal Mail sale, Goldman alone handled more than 200 deals worth $440 billion, according to data compiled by Bloomberg; the other three bookrunners shared almost a trillion dollars of business in almost 400 transactions. They, not Cable, should be taken to task for the "significant value" that the committee says U.K. taxpayers missed out on."

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