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_FEATURE

ie profit

te Prevent trust accounts administered
of anks or investment houses on behalf
MLAS from buying shares.
by _ despite the obvious profiteering
shenerchant banks and institutional ~
Mawholders, British Prime Minister
wide Thatcher has traded heavily on
.“SPread share buying by “ordinary -
Titons”
ca ©n program. The massive advertising
ih Gabe that preceded the sale of Brit
ATs > ’ ce)
Tell Sid or example, called on people

© Public interest in the issue.

to sell her government's privati-

about the share sale to widen

Significantly, the shares were being
purchased by corporate buyers. “It
represents massive buying by institutions
and the concentration of shares,”
Labour critic Blair charged.

And Sid has also dumped his shares
in the other privatized companies despite
the much-touted “public interest” in
share buying.

Amersham International, a company
involved in the packaging of radioactive
materials and the production of medical
equipment, was initially swamped with
share applications when it was privatized
in February, 1982. In fact, the share
price was set so low that the share issue
was oversubscribed by a factor of 24,
with only 65,000 applicants successful in
getting shares.

But within just one month, according
to the TUC, the number had dropped to
10,000. By May, 1987, that number had
dropped still further to 6,077. And of
those, 102 shareholders control more
than two-thirds of the company’s equity.

Jaguar, privatized in August, 1984,
had 125,000 shareholders but that
number had dropped to 35,749 by
March, 1987.

Perhaps the most dramatic drop was
in British Airways. Privatized in Febru-
ary, of this year, it initially attracted 1.2
million shareholders. But within four
months, there were only 420,056 share-
holders left. \

“The government has always claimed
that the benefits of privatization are
going to small shareholders — the peo-

ple of Britain,” researcher Richard Pond
told the Tribune in an interview. ie

t public expense

“But what this shows is that the
government offers shares cheaply, people
buy them and then sell them at the first
opportunity. It disputes the claim that
the shares are spreading ownership
among the public.

“In fact, they’re being bought by
institutions — universities, insurance
companies and corporations,” he said.

Pond emphasized that the record of
the companies which have been privat-
ized “gives the lie to any idea that share
ownership gives individual shareholders
any control over the companies which
were once nationalized.”

Moreover, the promise of quick prof-
its that attracted many to the sale of
shares in newly-privatized companies
may now have been thrown into doubt
by the volatile stock market.

The beginning of the current “‘bull
market” — in which prices have been
rising — in August, 1982 has coincided
almost completely with Thatcher’s pri-
vatization program. But over the past
two weeks, stock prices around the
world have dropped drastically, indicat-
ing what many analysts have
suggested — that the bull market is
about to end.

“Two factors have been involved in
the success of the share sales,” Financial
Times reporter Charles Leadbeater said
in an interview. “First, the prices were
set so low there was a profit to be made;
and second, the government has been
able to take advantage of a bull market
which has kept stock prices up.”

“But if the turnaround comes, and it
does appear to be coming,” he said.
“Things will be very different.”

rding to the first figures, there

me ce more than 4.5 million regis-
tered shareholders following the comple-
tion of the privatization in December,
1986. But in the months that followed,
hundreds of thousands of “Sids” sold
their shares, made their money — and

ut. 2a
ee cuits provided by British Gas cov-
ering the period from privatization to the
end of April, 1987, showed that the
number of shareholders had dropped to
3.1 million — a drop of 31 per cent in
just five months. ~ aii

The Company

The Price

The Sell-off

oversubscribed.

registration work.

27.11.84 col 435):

British
Telecom

Formerly part of the Post Office, BT was set up as a separate
corporation by the British Telecommunications Act 1981 to provide
telecommunication systems and services.

Profitable and successful before privatisation, with an estimated
net asset value of nearly £9 billion and profits of nearly £1 billion.

The Government disposed of 50.2 per cent of British Telecom for
£3.9 billion at the latest estimate in November 1984.

To allow investors to spread their payments, the sale was in three
segments: 40 per cent down payment in November 1984, then 30 per
cent in June 1985 and 30 per cent in April 1986.

@ BT was so badiy undervalued that the offer was five times

@ Shares were offered at 50 pence each and immediately shot
up to 95 pence — a premium of 45 pence. The Financial Times
(4.12.84) commented that“... the Government has sold BT
for some £1.3 billion less than its initial stock market value”.

@ Around 1 billion shares changed hands on the first day of
trading — just under a third of the 3.012 billion sold.

The City’s Rake-off . cai

@ The Government have admitted to costs of £189.5 million
(Hansard 24.1.85) — including £128 million in fees,
commissions etc (see below), the £51.5 million total value
of free and matching shares offered to BT workers. and
£10 million for the cost of receiving bank and initial

@ Immediately prior to the sale, Trade and Industry Minister
John Butcher gave this information on sell-off costs (Hansard

(from Stripping Our Assets: The City’s Privatization Killing)

see over

PACIFIC TRIBUNE, OCTOBER 21, 1987 e 7

Sie