Royal Mail Sale Probe Said to Call for Changes to IPO Process

A U.K. government-commissioned inquiry into the sale of Royal Mail Group Plc will call for changes to the way initial public offerings are managed in London, according to a person familiar with its findings.

The report urges debate among regulators, the stock exchange and companies about how to improve the book-building procedure so that the offer price can be changed later in the process, according to the person, who declined to be named as the findings aren’t yet public. The probe also found that the government could have raised 20 to 30 pence (31 to 47 cents) more per share for Royal Mail, the person said, equivalent to as much as 180 million pounds.

The government’s October 2013 sale of the former state mail monopoly has been the subject of criticism from the outset. The opposition Labour Party, auditors, and Parliament’s Business Committee have argued that the shares, which in January had soared 86 percent above their launch level, were underpriced. The stock is now 19 percent above its initial price.

Business Secretary Vince Cable asked former Labour Treasury minister Paul Myners in July to lead an inquiry into the sale. Myners’s report may be published as soon as today, according to the person familiar with its findings.

The report doesn’t criticize Lazard Ltd, which advised the government on the sale, the person said. Instead it suggests a range of measures that could be used to improve future flotations, the person said.

According to a report by Sky News television, those measures will include earlier publication of prospectuses to help more analysts publish research, and standardized shareholding disclosure requirements for institutions.

An April 1 National Audit Office report concluded that an attempt to lock “priority investors” into the IPO meant the government “took a cautious approach” and accepted lower proceeds. In July, Parliament’s Business Committee said taxpayers had missed out on “significant value,” and that Lazard, along with UBS AG and Goldman Sachs Inc., the global coordinators, failed to gauge demand adequately.

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