Sean O'Grady: A tale of previous hits and misses – but I’m in for Royal Mail shares...


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Once upon a time I was one of those people who refused to buy privatisation shares on the grounds that the Government (“wicked Tory” then as now being the usual adjectives attached to that phrase) was selling something that already belonged to me.

Hence I missed out on the first happy “stagging” opportunities in the likes of British Telecom and Jaguar Cars. In those days, unbelievable as it may seem now, multiple applications by individuals were not only allowed but almost encouraged.

Anyhow by the time Rolls-Royce came up for sale in 1987 I did buy some; apparently there’s an old stock market saying that “no-one ever made money buying Rolls-Royce”, but they’ve gone from £1.70 to about £11 now, the jewel of British manufacturing.

More through luck than judgment I did miss out on the BP debacle of that same year; when Nigel Lawson, as Chancellor, sold off the remains of the UK government’s holdings (it was nationalised by Winston Churchill during the First World War) it was priced to sell – clearly at a discount to the market price. However between the pricing announcement and the listing itself came Black Monday and a market crash, and a slump in the BP share price. Some unlucky punters had already sent in cheques, and were lumbered with an obligation to buy shares that were cheaper to purchase on the open market. Oh dear.

Apart from that, though, privatisation has brought modest riches to millions, though rather diminished since BT went from £15 in the boom to about £3.50 now. I have no doubt the Royal Mail will do well - under-priced to avoid political embarrassment, its pensions black hole filled in by the taxpayer, and a mild play on the growth in e-commerce.

The only risk is the burden of the universal letter rate; if past experience is anything to go by a future government or regulator will in due course relieve the Royal Mail of that problem, especially if there is any danger it would push the firm into financial trouble. No government could tolerate the UK being the only country in the world without a functioning postal system.  Banks aren’t the only places where moral hazard can work in an  investor’s favour.