Tuesday, 15 October 2013

Pubs, puffing and the post

In a powerful speech on the adjournment last night, Greg Mulholland MP attacked the so-called pubcos and the misbegotten legislation that enabled them to flourish. His concern was to save not only public houses as an institution but also to save those tenants who suffer from the unscrupulous practices of pubcos. He set out in detail and at length, but clearly, how we had reached the current situation. If you haven't already done so, I recommend reading it, though, as Mr Mulholland made accusations against several named individuals under parliamentary privilege, care should be taken in quoting from it.

However, when Mr Mulholland said:

this whole sorry saga is a tale of one of the worst examples of reckless, irresponsible capitalism this country has ever seen—a get-rich-quick scheme for a greedy few that has marred lives and closed thousands of pubs and that has caused losses of billions for the UK economy, pension funds and the Treasury. [...] the large, leased pubcos are not pub companies in any real sense. They are highly leveraged property companies
A quick look at the share prices of [the prominent pubcos] reveals the profile of a classic pump-and-dump operation, with a huge surge like a giant heartbeat, then failure and the resultant flat line.
With positive broker comments and heavy financial public relations, the insiders exited and the gullible lost money. Pension funds, choosing to believe the hype from the companies and the endless positive messages of house brokers, stayed in and lost fortunes for pensioners. Naive retail investors did the same. The winners were the insiders and the directors; the losers were the publicans, their communities and the pensioners whose funds unwisely left money in the pubcos.

the surge in the price of Royal Mail shares was fresh in my mind.

There was much talking-up of the value of Royal Mail before the public offering, so it was not surprising that trading began above the offer price. However, the shares currently stand 50% above the offer price. It does seem that the advice to the Chancellor as to the pricing favoured city speculation rather than a fair return to the taxpayer, and I note that Lazards, the advisors concerned, are to face questioning by Select Committee next week.

I have this feeling that today's share price over-values Royal Mail. Whether the price settles down to something closer to the government's initial valuation, or plunges below it in a reflection of the pubco boom and bust, only time will tell.

Of course, if the coalition had adopted the approach in the Liberal Democrats 2010 manifesto, all this nonsense could have been avoided.

No comments: