From: jim@cs.strath.ac.uk (Jim Reid)
Newsgroups: soc.culture.british
Subject: Re: Privatisation snippets
Date: 14 Oct 92 10:37:43 GMT
	<1992Oct13.090412.27631@bristol.ac.uk> <1992Oct13.115324.5165@osf.org>
In-reply-to: david@postman.gr.osf.org's message of 13 Oct 92 11:53:24 GMT
Originator: jim@hunter

In article <1992Oct13.115324.5165@osf.org> david@postman.gr.osf.org (David George) writes:

   In article <JIM.92Oct12172829@hunter.cs.strath.ac.uk> jim@cs.strath.ac.uk (Jim Reid) writes:
   >:The difference is that the Government has been *deliberately* selling
   >:off shares in the nationalised industries at artificially LOW prices.

   Maybe you could produce some evidence to support this claim ?

Certainly. The first privatisation was Amersham International. Within
about 1 month of it being sold, shares increased in value by a factor
of seven. The first big privatisation was half of BT. The shares were
sold at 120p. On the first day's trading, they had increased to
150-160p. I recall reports that they peaked at 180p then: 50% more
than the government's valuation. These BT shares now trade at roughly
three times the price paid at privatisation 8-9 years ago. This far
outstrips inflation or the general increase in stock market prices. 

Similar effects were seen with the sell offs of British Gas, British
Steel, British Airways, BAA, Powergen, National Power, Scottish Power
and the regional water and electricity companies. These companies were
deliberately under-capitalised - the share capital was less than each
company's assets - to ensure that the share price would rise. [i.e So
the jackals in the City could buy up the company, sell its assets and
make a profit. Or, failing that, just make money on the steadily
appreciating share prices.]

When Royal Ordnance and BL were sold to British Aerospace, they were
sold off on the cheap. Both had assets - plant, factories and land -
that were worth far more than the price paid. BAe will recoup more
than the amount they paid for RO when they sell off the land around 1
of the RO factories that they are closing!

Another point that is often overlooked is that the government wrote
off most of the debts of these concerns before selling them off. This
in itself is disgraceful. This also ensured that the company's shares
would rapidly appreciate since they had little or no debt burden.

It could also be argued that these shares should have been over-valued
because the companies are de facto monopolies. They are blue-chip
investments which are guaranteed to make large profits and pay healthy
dividends for years to come. Their shares should therefore have been
offered at a premium, not a discount.

I also recall that the remaining government stake in BP was sold off
on the cheap: shares were offered at discounts below the prevailing
market price for the shares that weren't in government hands.

Incidentally, we've never seen the government complain to the merchant
banks and stockbrokers who handled the sell-offs about these low
prices, let alone force them to make good the losses to the taxpayer.

   Jim, if your so good at telling which shares are underpriced, how come your
   not a millionaire yet ?

Firstly, I'm too poor to buy shares in sufficient quantities to make
significant amounts of money. Secondly, I don't trust the stock market
because it's full of crooks and people who'd sell their granny to make
sure they made a quick buck. These people can manipulate the stock
market to guarantee that they make huge profits for themselves by
using other people's money (ie. mine) for share speculation. Thirdly,
I didn't buy shares in the formerly nationalised companies because I
didn't see the sense in spending my money to buy something that I
already owned.

   In article <1992Oct13.090412.27631@bristol.ac.uk>, smee@bristol.ac.uk (Paul Smee) writes:

   |> It's been suggested that if the rules for local councillors applied to
   |> the Government, Major and Lawson would have been 'surcharged'

   It could also be suggested that they were simply following the
   policy that the government recently won an election on.  That is
   maintaining the pounds value within the ERM, a policy supported by Mr
   Smith and Mr Ashdown.

Well, since the government has since made a complete about turn on the
cornerstone of its economic policy (sic), it is therefore NOT
following the policies it was elected on. The inference of that simple
fact is that the government has no mandate to govern and should resign.

You also miss (or ignore) the point that was being made. Local
councillors are, quite rightly, held personally responsible for
financial losses that their decisions or policies cost their councils
- EVEN IF THEY ARE FOLLOWING THEIR ELECTION MANIFESTO. The same
standards should be applied to MPs and government ministers. That
would stop any government of any political hue from frittering away
state assets or squandering taxpayer's money. If this policy is good
enough for local government, it should be good enough for national
government too.

		Jim