They were hired by the Government to help sell one of its most valuable and historic assets – and were paid millions of pounds in fees for their work valuing Royal Mail ahead of its flotation last month.
Goldman Sachs and UBS priced the company at £3.30-a-share, raising the taxpayer £1.7bn from the sale. But shares instantly soared in value and have remained high ever since. At tonight’s closing price of 545p more than a month after the initial public offering, the public purse would be more than £1bn better off. The official share register, obtained by The Independent, shows there were 518 separate entities holding more than 5,000 Royal Mail shares by the end of October. City firms applied for more than 20 times the number of shares available – and both Goldman Sachs and UBS have piled in to the frenzy.
Goldman Sachs International had brokered deals on 21.5 million shares worth around £123m by 31 October, the document shows. The bank insists it bought the shares on behalf of clients and says it hasn’t acquired any for itself. UBS had also bought 375,000 shares. Again, it claims to be holding the stock on behalf of third parties.
The low flotation price has turned into a major political headache for the Government – particularly when its rival, JP Morgan, valued Royal Mail at between £6.8bn and £8.5bn. Vince Cable opted for Goldman and UBS because they offered to do the job for £13m – a saving of just £1m from the nearest competing bid. The fact that Goldmans is now a significant shareholder, a fact first reported by Private Eye, will prove embarrassing for the Business Secretary.
Today the Bow Group think-tank led by Sir John Major called for an inquiry into the flotation. It said the company had been “catastrophically undervalued”, claiming that the privatisation was a “short-sighted firesale”, which has deprived taxpayers of a “valuable national asset”.
Other substantial Royal Mail shareholders listed by Equiniti, the firm handling Royal Mail shares bought via the Government’s website, include banks ABN Amro and JP Morgan, and leading hedge funds such as Hargreaves Lansdown. However, the identity of most of the shareholders remains shrouded in secrecy as their interests are held by an array of nominee companies.
Two entities both called Equiniti Corporate Nominees Ltd between them hold almost 130 million shares “on behalf of clients”. It is listed as a dormant company, does not trade and is therefore exempt from audit. Its ultimate controlling company is Advent International Corporation, an American hedge fund. Sixty separate HSBC “nominee” companies also have shareholdings, and Chase Nominees Ltd holds 26.3 million shares on behalf of its mystery clients.
By contrast, there are a few individual shareholders who are named in the register, including Mark Wertheim from Ilford, Essex, Duncan Marshall from Derbyshire, Gurnek Sanghera from Solihull, Michael Williamson from Salford, Greater Manchester, and Ronald Young from Fife
Shadow Business Secretary Chuka Umunna MP told The Independent: “Ministers have major questions to answer amid concerns that taxpayers have been short-changed to the tune of hundreds of millions of pounds.
“Vince Cable has dismissed these concerns as ‘froth’, but we know that just days before the fire sale took place he considered the option of a higher price... before rejecting the option. Ministers know something has gone badly wrong here.” A Goldman Sachs spokesperson said: “We did not receive any allocation in the flotation for our own account. Shares that appear in our name are either shares that we hold on behalf of our clients or shares that relate to trading activity with clients.”
Goldman’s role in the Royal Mail sell-off has raised fresh questions over its influence on Government policy. The bank is registered in the “low-tax, light regulation” US state of Delaware. Its regime is so lax that even the Cayman Islands has accused Delaware of playing “faster and looser” than other offshore jurisdictions.Earlier this year, the High Court ruled that an embarrassing “sweetheart” deal brokered by HMRC that saved Goldman Sachs £20m in tax was “lawful” but “not a glorious episode in the history of the revenue”.
It emerged that the deal was struck partly to avoid “major embarrassment” to Chancellor George Osborne, who was said to be worried that Goldmans would withdraw from a new code designed to tackle tax avoidance.
The Department for Business, Skills and Innovation declined to comment as Vince Cable is set to be grilled by a select committee on the Royal Mail share sell-off next week.
- More about:
- Goldman Sachs
- Jp Morgan Chase
- Liberal Democrat Party
- Royal Mail Holdings