Chuka Umunna, Labour MP for Streatham and the shadow business secretary, says Yes
Taxpayers are at risk of being short-changed by the government’s Royal Mail fire sale. Last week, Panmure Gordon valued Royal Mail at £3.7bn to £4.5bn – significantly higher than the price tag of between £2.6bn and £3.3bn that the government is selling its stake at. Managing director Gert Zonneveld said he was “convinced the government had got it wrong”. In the last few days, we have seen investors rush to buy shares in anticipation of the price rising by as much as 20 or 30 per cent on the first day of trading, and smaller investors are being squeezed out. The estimate also fails to fully take into account Royal Mail’s extensive property portfolio of over 2,000 sites. Three of its prime London sites at Paddington, Mount Pleasant and Nine Elms have been identified as surplus to requirements. The latter two have been valued as highly as £1bn and £500m respectively. Chuka Umunna is shadow secretary of state for business, innovation and skills and Labour MP for Streatham.
Paul Taylor, founder and managing director of McCarthy Taylor, says No
The decision to sell Royal Mail shares in the 300 to 330p range may appear undervalued. It is suggested that its property holdings could be sold off to realise gains, and demand seems to be high. On that basis, short-term gains could be made. But the low share price could actually reflect many of the risks of holding this stock. Roughly half of Royal Mail revenue still comes from mail delivery, which has a very limited future in the digital age. The parcel delivery business, meanwhile, is in an extremely competitive marketplace, where Royal Mail does not benefit from the same monopolistic advantage. Perhaps, over time, public support for Royal Mail will diminish. It will no longer be seen as a public treasure, and other delivery companies will be viewed equally. Our view is that retail investors could get in and out quickly, but this a highly speculative investment and not a safe bet for the long-term. Paul Taylor is founder and managing director of McCarthy Taylor.