The government scrapped a “Tell Sid-style” sale of NatWest share to the public amid fears it could have cost taxpayers up to £450 million.
In November, the previous Conservative government floated the idea of selling a part of the nearly 20 per cent state stake in FTSE 100 to individual investors.
Rachel Reeves, however, revealed that the new Labour Government had scrapped the initiative as it was a “bad use of taxpayers money”. The chancellor stated: “After considering advice, I’ve concluded that a retail shares sale offer would include significant discounts which could cost taxpayers millions of pounds. This would not be a good value and will not proceed.
Treasury estimates showed that the Treasury expected the cancellation of the sale to save between £100,000,000 and £450,000,000. This figure represents the avoided loss of future income from share sales if a retail offer were to take place, it stated. Estimated retail offers of £1 billion to £3 billion were included, along with “a package for retail investors which equates to an average discount of 10% to 15% on the market price”. The calculations did not include any other potential costs related to the abandoned sale.
NatWest announced last Friday that they had spent £24,000,000 preparing for this deal.
Jeremy Hunt had hoped a retail offering of NatWest shares would be similar to the privatisation of British Gas in 1986, which was famously marketed using the slogan “If you see Sid tell him.”
This would have been a first for the government to sell shares in a bank it owns to individuals. It was part of a wider effort by the government to boost London’s stock exchange, which has suffered from low valuations and an absence of new listings.
The Treasury had hired M&C Saatchi to create a marketing campaign that would increase interest in NatWest’s stock. Goldman Sachs, Barclays and other investment banks advised on the structure of the transaction. It would have offered a discount to NatWest’s current share price to try to attract investors. Bonus shares would have been given to people who had held their stock for a minimum of a year.
Rishi Sunak’s May snap election prompted the Conservative government to halt the launch of the retail offer . The Treasury was forced to put off the retail offer during the purdah, a period of government activity that is restricted before an election.
Reeves stated that she would continue to follow the target set by the previous government of selling its NatWest stake in full by 2025-2026.
The government stake was left as a result of NatWest’s £45.5 billion bailout in 2007-09, when taxpayers owned almost 85 percent of the lender. Since 2015, the state’s shareholding was reduced through deals that sold chunks of stock to both institutional investors and to the bank. A trading plan “dribbles in” state-owned stock to the stock market.
NatWest stated: “Any decision around the sale government shares is a matter of His Majesty’s Treasury.”
NatWest shares closed at 371 1/2p up 9 1/2p or 2.6 percent, which valued the taxpayer stake at just under £6 billion.
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