By Mark Kleinman, City editor
The government is poised to sell a multibillion pound stake in Royal Bank of Scotland (RBS), resuming a huge privatisation programme that has been stalled for three years.
Sky News has learnt that City bankers and investors have been primed to expect a disposal of part of taxpayers’ 70.5% shareholders, potentially as soon as this week.
Full details of a prospective deal were unclear on Monday, and bankers cautioned that it would be subject to considerations relating to wider stock market conditions and ministers’ ability to demonstrate that the taxpayer was getting value for money.
Those factors could cause any share sale to be delayed, they added.
One City analyst suggested that a disposal could target proceeds of more than £3bn, equating to a roughly 10% stake in RBS.
If such a transaction was to take place, it would reduce taxpayers’ interest in the Edinburgh-based lender to roughly 60%, putting RBS within sight of the milestone of the Government finally relinquishing the majority ownership of the bank it has held since 2008.
A fund manager at a major institutional investor said the City had been “awash with speculation” in recent days that an announcement from the Treasury was imminent.
RBS is due to hold its annual general meeting on Wednesday, and it is unclear whether a sale would take place prior to that or shortly after it.
Any sale would require the approval of Philip Hammond, the Chancellor, and would follow advice from UK Government Investments (UKGI) that it was an appropriate time to dispose of the shares.
A decision to resume RBS’s privatisation would in itself be unsurprising after it reached a long-awaited $4.9bn (£3.6bn) settlement with the US Department of Justice (DoJ) this month relating to the mis-selling of mortgage bonds before the financial crisis.
UKGI has already described it as “an entirely fair assumption” that it would be able to sell a £3bn stake in RBS during this financial year – with projections for a further £12bn of disposals during the next four fiscal years.
One headache for Mr Hammond will be that a share sale at this juncture would be at well below the 330p price at which his predecessor, George Osborne, offloaded a 5.4% stake in RBS in August 2015.
Shares in the bank closed at 289.7p on Friday, giving RBS a market capitalisation of £34.8bn and making the taxpayer’s stake worth just under £24.5bn.
RBS was rescued from collapse with capital injections from the Treasury totalling £45.5bn at an average share price of 502p.
A substantial sale, which would probably be assembled through an overnight book-building process, will benefit RBS by reducing the so-called ‘Government overhang’ which has been a factor in holding back a recovery in its share price.
Mr Osborne was criticised for crystallising a £1.1bn loss for taxpayers with the previous share sale, leaving Mr Hammond exposed to similar attacks because of the even larger prospective losses that a deal will incur.
However, the longevity of taxpayers’ ownership of a majority stake in RBS – now just months short of a decade – will allow the Chancellor to emphasise the importance of restarting the bank’s return to full private ownership.
City analysts have long abandoned any notion that taxpayers would be able to recoup their £45.5bn bailout funds following the series of radical restructurings that RBS has undergone since 2008.
Its global investment banking ambitions have been curtailed, dozens of businesses have been sold, and tens of thousands of jobs have been axed – initially under the leadership of Stephen Hester, and more recently of Ross McEwan.
The recovery of RBS, which before the crisis was run by Fred Goodwin, has gained fresh momentum in recent months, culminating in its first annual profit for a decade and the lower-than-expected DoJ fine.
That has paved the way for Mr McEwan to set out a dividend policy as soon as RBS’s half-year results, with shareholders expected initially to receive a tokenistic payout before rising over time.
Several investment banks and law firms have already been lined up to work on the reprivatisation of RBS, with Rothschild holding a role as the Treasury’s capital markets adviser on the process.
Goldman Sachs is also on board as the Government’s wider privatisation adviser, while Credit Suisse is also understood to have been asked to play a role in a deal.
Other banks which worked on the last share sale, including Citi, Morgan Stanley and UBS, are likely to be in the frame this time around, according to bankers.
They are expected to waive the usual fees for such a transaction, however, as they did in 2015.
The resumption of RBS’s privatisation will come just as Oliver Holbourn, who ran what has become the financial institutions arm of UKGI, joins the bank as its new strategy chief.
More from Business
Smiths Group in talks about £6bn transatlantic healthcare tie-up
WHSmith rated UK’s worst high street shop by Which?
Tycoon Hands plots £2.5bn takeover of Quintain
Customers still suffering one month after TSB meltdown
Asos to try on new chairman as McBride leaves the catwalk
Richard Branson reveals his astronaut training as space visit looms
An announcement about his appointment is expected soon after RBS’s AGM as the Treasury seeks to avoid any conflict of interest row because of his former role influencing voting decisions on the bank’s boardroom pay and governance.
A Treasury spokesman said on Monday that it did not comment on market speculation, while RBS also declined to comment.
Related Topics: Continue Reading
You may like
Italy finally agreed on a government, ending months of political deadlock A government coalition has finally been reached in Italy, ending a months-long stalemate that seemed to be headed towards a snap election. President Sergio Mattarella on Thursday approved a cabinet list presented by Giuseppe Conte. Conte has been appointed prime minister and, along with his cabinet, will be sworn in on Friday. Conte initially dropped his bid to secure cabinet after President Mattarella’s blocked Conte’s initial choice for economy minister, which cast doubt on the ability of the coalition to form a government.
A government coalition has finally been reached in Italy, ending a months-long stalemate that seemed to be headed towards a snap election.
Prime Minister-designate Giuseppe Conte initially dropped his bid to lead a coalition after President Sergio Mattarella blocked Conte’s initial choice for economy minister because of his euroskeptic views, which cast doubt on the ability of parties to form a government.
But on Thursday Conte presented a second cabinet list to Mattarella, which proposed economics professor Giovanni Tria who doesn’t advocate leaving the euro, though is critical of the EU. The president approved the list Thursday and announced Conte would be the country’s new prime minister.
Conte, along with the rest of his cabinet, will be sworn in Friday.
Italy has struggled to form a government since its March 4 elections. The anti-establishment Five Star Movement, together with far-right League won approximately 50% of the popular vote, but failed to secure the majority needed to win. As coalition attempts remained in deadlock, calls were made to appoint a technocratic interim government until fresh elections could be held early next year.
Shortly after the coalition announcement was made, League leader Matteo Salvini criticized an EU leader for reportedly racist comments made about Italy’s impoverished southern region, Reuters reported. Salvini called the comments “shameful and racist,” adding: “The new government will make sure that the rights and the dignity of 60 million Italians will be respected.”
SEE ALSO: Italy’s prime minister-in-waiting has quit trying to form a government, casting uncertainty over the country
Join the conversation about this story »
NOW WATCH: Why some countries are more corrupt than others
Here’s a breakdown of costs for Mueller’s Russia investigation so far The US Justice Department says around $17 million was spent so far in the ongoing Russia investigation being conducted by special counsel Robert Mueller. According to an earlier spending report, the DOJ said $6.7 million was spent in the first 4 1/2 months of the investigation, which began in May 2017. Another $10 million was spent within a six-month period between October 2017 and March 2018, according to the DOJ expenditure report. Trump has frequently railed against the investigation, calling it a “witch hunt” and scrutinizing its cost. Funding for the investigation comes from the Treasury Department and it is not tied to the annual budget, Politico reported on Thursday.
The federal Russia investigation being conducted by special counsel Robert Mueller has so far cost about $17 million, according to a report the DOJ released on Thursday.
The special counsel’s office released its mandatory statement of expenditures itemizing costs accrued between October 2017 and March 2018. About $10 million was spent within that six-month timeframe. About $6.7 million was spent in the opening 4 1/2 months of the probe, which began in May 2017.
Here’s a breakdown of the costs for October 2017 through March 2018, which according to the special counsel’s office, is within the approved budget:
Salaries and benefits for employees in the special counsel’s office: $874,069 Cost of Justice Department employees temporarily assigned to the special counsel’s office: $1.9 million Travel expenses: $532,340 Information technology services: $226,730 Supplies and materials: $29,694
The Russia investigation was launched as part of an effort to determine the extent of Russian interference in the 2016 US presidential election, and to see whether members of Donald Trump’s campaign colluded with Russia.
Mueller has also been working to determine whether Trump attempted to obstruct justice in connection with the investigation after he took office.
Trump has frequently railed against the investigation, calling it a “witch hunt” and scrutinizing its cost.
Read the latest expenditure report below:
Mueller Russia Expenses — October 2017 to March 2018 by Bryan Logan on Scribd
SEE ALSO: Trump reportedly lobbied Jeff Sessions to retake control of the Russia probe — making Sessions a key witness in the investigation
Join the conversation about this story »
NOW WATCH: What will probably happen with the North and South Korean peace treaty
The ‘Godfather of Silicon Valley’s’ investment firm, which helped launch Facebook, Twitter, and Airbnb, says it won’t raise a new fund Ron Conway, considered the “Godfather of Silicon Valley,” said his venture capital firm, SV Angel, will not be raising a new fund. In a Medium post co-authored by the firm’s general partners, Conway said it will “scale back the existing SV Angel team” and shift focus to angel investing. He expects to cut checks between $25,000 and $100,000 per company. Founded in 2009, SV Angel made early bets on Facebook, Twitter, and Airbnb.
Ron Conway, one of the tech industry’s most prominent and powerful startup investors, who had early stakes in Facebook, Twitter, and Airbnb, said in a Medium post on Thursday that his early-stage investment firm, SV Angel, will not be raising a new fund.
Conway and his son, Topher, who co-manages the fund, said they will continue to use the SV Angel brand and cut checks — but in smaller amounts and as angel investors.
“Writing smaller checks allows us to stay true to our DNA, remain nimble and fulfill our commitment to supporting founders,” said the letter, which was co-signed by the Conways, as well as general partners Brian Pokorny, Kevin Carter, and Robert Pollak.
The letter described a changing ecosystem in early-stage tech investing — a space that has “gone through significant changes over the last 10 years.”
Seed funding was once a field in which angel investors and specialized firms invested tens of thousands or hundreds of thousands of dollars into unknown startups. Since then, the competition and the prices have grown significantly. On Thursday, for instance, San Francisco women’s health startup Modern Fertility raised $6 million in seed funding (in a funding round that included SV Angel).
While there were just a handful of funds investing in seed rounds when SV Angel launched in 2009, today, there are thousands of firms and individuals investing. In 2016, about 250 venture capital funds raised over $40 billion — breaking a 10-year record — to deploy into startups, according to the National Venture Capital Association.
As billions and billions more dollars flowed into venture capital, it become tougher for some investors to compete for participation in a company’s funding round.
With it no longer raising outside funding, SV Angel will operate, effectively, as a family fund run by the Conways. They expect to invest $25,000 to $100,000 per company.
Here’s the Medium post in full:
“The investing ecosystem has gone through significant changes over the last 10 years. When we started SV Angel, there were just a handful of funds investing in seed rounds. We all worked together for the best outcome of founders and our early investments in companies like Twitter, Pinterest, Airbnb and Square were done in that spirit. We invested in great founders who pitched a compelling vision for the future, rarely having more than their word to invest on.
“Today there are thousands of firms and individuals investing in seed rounds. Seed investors are raising larger funds, becoming more ownership-focused and investing primarily on adoption and traction. Seed investing now encompasses both backing founders at the earliest stages of a company and investing in teams with early-adoption. The amount of money raised in seed rounds has doubled and valuations have increased significantly.
“As we thought about how best to serve founders in this environment, we also realized we no longer need to write big checks in order to help. There are many great investors that we’d like to partner with and being involved at any level in a company we like is more important to us than getting the right allocation for the fund.
“As this dynamic materialized more, we realized there were diverging interests between what’s best for founders and what’s best for our investors.
“For this reason, we have decided to go back to basics and invest as individual angels instead of raising a new fund. Ron and Topher will continue to use the SV Angel brand going forward, investing $25k — $100k per company. This allows us to better align ourselves with founders and other investors which is ultimately what’ best for founders.
“With these changes, we will scale back the existing SV Angel team. Our partners, Brian Pokorny, Kevin Carter and Robert Pollak, will stay on as advisers to SV Angel. We all plan on remaining active members of the investing community and collaborating with each other on future investments.
“Ron and Topher will continue to co-manage the existing SV Angel funds to help founders and evaluate follow-on opportunities.
“Writing smaller checks allows us to stay true to our DNA, remain nimble and fulfill our commitment to supporting founders. This approach and unmatched relationship network will continue to set us apart in our ability to support startups at every turn.
“We know that if we continue to get behind the right people, success for us and the founders we support will follow.
“- Topher, Ron, Brian, Kevin, Robert”
SEE ALSO: MARY MEEKER’S TECH STATE OF THE UNION: Everything happening on the internet in 2018
Join the conversation about this story »
NOW WATCH: 80% of startup money goes to 3 states — here’s what one visionary is doing to help spread the wealth
Here’s what we should have instead of a trade war
Instead of a trade war we should have a plan to boost our economy. I’m not talking about tax cuts that create miracle growth, I’m talking about actual goals that we set and meet that will help us domestically. We will not advance the US economy by trying to hurt the rest of the world’s. That’s just stupid.
Here’s what we should have instead of a trade war — a plan. We should have a plan for the US economy.
I’m not talking about some kind of socialist quota-based system, I’m talking about a reasonable set of goals and ways to achieve them.
This has been completely absent from the Trump administration, and frankly the GOP (where was their Obamacare replacement?)
Instead of coming up with a plan to enrich the United States and advance its economy, this administration thinks that if it punishes the rest of the world, the US will some how come out unscathed and on top. This is silly on its face since other countries can retaliate, but even worse since it’s taking up valuable time that we could be using to come up with an actual plan.
And as I’ve written before, we desperately need one. America has been living off short-term thinking for too long.
We do not have a real plan for healthcare, and costs continue to gobble up American wages. We do not have a plan for dealing with globalization and economic change, but that change continues to shape our economy. We do not have a plan to update our decrepit infrastructure. The one plan we did have — the Federal Reserve’s post-financial crisis program — is being unwound, marking the end of the last clear, executable plan to bolster America’s economy.
All of these problems have been addressed laughably, if at all. And I mean that literally, when Trump announced his drug-pricing plan, the very companies he was trying to target saw their stocks surge and Wall Street said he was wasting their time. Literally, that’s what people said.
Sick of whiners
There seem to be two main thrusts for every Trump administration argument about trade. The first is that we need tariffs to aid in the resurgence of American manufacturing, and second we need to force countries to treat the US “fairly,” especially China.
The first argument has us putting steel and aluminum tariffs on our friends and allies (the European Union, Canada, and Mexico). No matter that the last time the Bush administration put a tariff on steel it lasted all of 30 months and when all was said and done, the Institute for International Economics (IIE) estimated that as many as 26,000 jobs were lost in steel-using industries (like the auto industry, for example).
In other words, it was no magic bullet for the steel industry. All it did was make the United States look like a bunch of whiners who can’t solve their own problems.
According to the Financial Times, EU officials were planning tariffs on everything from orange juice to whiskey to dairy, if the tariffs are enacted against them. In 2002, threats like that were enough to get Bush to back down, luckily.
“The proposed cure is worse than the disease,” Lee Branstetter said of these tariffs when Business Insider caught up with him a few months ago, adding that it’s “quite likely” US allies and rivals would retaliate.
“The WTO will give them a right to inflict equal pain on other industries,” he said.
What’s more, we’re whiners who invoke national security for every little problem. This too has consequences. It could “set a precedent that anyone, especially the Chinese, can use against us,” Branstetter said.
Speaking of the Chinese — who Trump feels have treated the United States more unfairly than any other nation — they have a plan. It’s called the “Made in China 2025 Plan,” and it’s basically a plan to conquer technological space. It’s why China’s been doing things like quietly buying US “crown jewel” tech companies.
And we, stupidly, have been letting them. Perhaps because we didn’t have any respect for plans (though we’re working on that).
The United States used to be better at this, especially in the technological space. Back during the Reagan administration we used technological planning to out maneuver the USSR. Part of that was a Department of Defense project called Project Socrates, it was directed by a then 30-something physicist named Michael Sekora. Reagan moved to make the project a government agency, but President H.W. Bush shut it down.
To Sekora, the way the Trump administration — and in fact most people in corporate America — look at technology is inherently flawed. They look at it as one off products or companies, when in fact it’s an entire space.
“We have cell phones, laptop computers, smart watches, etc. as individual products,” Sekora explained to Business Insider over email. “And people think in terms of the impact of these individual products. [They think] if the Chinese gain a technology the impact is they can produce these individual, separate products. MBAs are taught to put products in small little silos which they can then address as neat little packages.
“They don’t think of technologies as nodes in the technology space, which is the foundation of all competitive advantage… The nodes give the Chinese more ability to maneuver in tech space to increase and maintain the competitive advantage via excelling at satisfying various customer needs through a variety of various products and services (interconnected in tech space) that will come and go over time.”
In other words, China is looking at the entire rink and skating to where the puck is going to be and we…
“While we are ‘playing hard ball’ with the finance [tariffs]. China continues to out maneuver us in the technology space that fully dictates the finances,” Sekora said.
We aren’t thinking hard enough. We aren’t thinking long-term enough. We’re not looking forward, we’re desperately trying to reshape a past that’s already gone. It’s a losing strategy.
We need a real plan.
SEE ALSO: Wall Street found a parasite growing in the US economy that could spur the next recession
SEE ALSO: There are no winners in Trump’s economy, only non-losers and big losers who are getting clearer by the day
Join the conversation about this story »
NOW WATCH: How a $9 billion startup deceived Silicon Valley
At Facebook’s annual meeting, Mark Zuckerberg stuck to his talking points — and ignored some of shareholders’ biggest concerns (FB) At Facebook’s annual meeting, company officials faced criticism from investors and a slew of shareholder proposals urging reforms. Addressing concerns about the abuse of Facebook’s service, CEO Mark Zuckerberg and his team repeated talking points they’ve previously made to the press or in Congress. Zuckerberg and company ignored pointed concerns about the company’s governance, a longstanding thorn in the side of many investors.
A month after Facebook CEO Mark Zuckerberg faced critical questions from members of Congress, he and his team faced another skeptical audience on Thursday, this time in the form of the company’s shareholders at its annual meeting.
Shareholders peppered Zuckerberg and his fellow executives and board members with questions about their ability and commitment to identify and delete fake accounts and abusive posts, the lack of diversity among Facebook’s executive ranks, and the alleged censorship of conservative voices on its social-networking service.
They also pushed the company to make reforms to its corporate governance, set up a board committee to assess and monitor risks to its business, and issue reports on how it polices content on its site and on the differences between what it pays male and female workers.
One shareholder even interrupted the proceedings early on, wanting to discuss the directors whom the company had nominated for to serve for another year. She reportedly was removed from the meeting.
“We’re at a vital impasse for our company,” said Christine Jantz, the chief investment officer at NorthStar Asset Management, who spoke up in favor of a proposal that would have given more voting power in the company to regular shareholders at the expense of Zuckerberg. “We are faced right now with a situation for which Facebook clearly does not have the expertise to manage.”
Zuckerberg stuck to his talking points
In response to the criticisms, Zuckerberg and his colleagues ignored the concerns about the company’s governance and calls for more transparency about its hiring practices. Zuckerberg spent much of his time, instead, going over many of the recent changes Facebook has made and previously announced that attempt to block fake accounts, the spread of propaganda through its site, and posts that violate its rules. But he offered little new, essentially just repeating talking points he’s made in press appearances and in his congressional hearings.
“When I think about where are now as company, the big theme that we’re focused on is making sure we take a broader view of our responsibility,” Zuckerberg said. He continued: “Over the last several years we didn’t do enough to be proactive in looking at how people could abuse these tools.”
Despite the criticism — and the fact that several of the shareholder proposals were supported by influential proxy advisor Institutional Shareholder Services — there was little risk that anything dramatic would happen at the meeting, beyond the occasional interruption. Zuckerberg controls nearly 60% of the voting power at Facebook, meaning he is able to decide nearly any issue up for a vote essentially by himself. So it was no surprise that Facebook’s entire slate of directors was elected and all of the shareholder sponsored proposals were voted down.
Facebook did not immediately release the vote totals, but company officials said they would be published by next week.
Facebook has been reeling from a series of scandals
The shareholder meeting follows a string of scandals at the social-networking company. During the presidential election in 2016, Russian-linked groups reportedly hijacked the site to spread propaganda in an attempt to influence the election. The site has also reportedly been used to spread hate messages and perpetuate the persecution of the Rohingya minority in Myanmar. More recently, Facebook has been caught up in the Cambridge Analytica fiasco, in which the personal data of up to 87 million users was improperly leaked to the Trump-linked data analysis firm.
Zuckerberg acknowledged that the company hadn’t focused enough in the past on such issues, but said it was doing so now. Facebook is removing hundreds of millions of fake accounts, now has 20,000 employees reviewing content on its site, and is using artificial intelligence tools to proactively identify posts and people who violate its rules. It is also being more transparent about what it’s doing to police content and making it easier for users to see and control the data they have on the site, he said.
Such steps “are going to have a very positive effect on making our service better,” he said.
But Facebook isn’t going to solely focus on trying to thwart abuse of its service. It’s also going to continue to build new features that encourage users to connect with each other, he said.
“We feel a responsibility to keep building the next generation of new experiences to help connect people in meaningful ways,” he said.
Zuckerberg’s control of Facebook has many investors riled
But many shareholders hoped the company would focus or at least be open to discussing other issues. Facebook’s voting structure is a particular bugaboo with many investors. The company has a dual-class stock structure that gives certain insiders with Class B shares — most notably, Zuckerberg — 10 votes per share.
Two years ago, Zuckerberg attempted to create a third class of stock that would have allowed him to maintain control of the company even as he sold off his stake. Facebook abandoned the effort only after shareholders filed suit to try to block it.
One of the shareholder proposals would have urged the company to eliminate the super-voting power accorded to Zuckerberg and other holders of Class B stock. Another proposal would have urged the company to eliminate a bylaw that would required a two-thirds majority to pass certain proposals. That bylaw isn’t in effect now, but would be triggered if the voting power of Class B shares ever fell below a majority of the company, thus helping to cement Zuckerberg’s power.
Facebook had urged shareholders to vote against the proposals in its proxy statement, but officials declined to address the matter at the meeting.
Another shareholder proposal urged the company to be more transparent about its so-called gender pay gap. Other companies have started to release more details about the difference between what they pay male and female workers. The United Kingdom now requires this disclosure of companies based there, and Facebook’s UK branch has released data in accord with that law. But Facebook has declined thus far to release hard data on its gender pay practices.
“Our company is best served by a proactive approach to address this structural bias,” said Natasha Lamb, a managing partner at Arjuna Capital.
Facebook official didn’t address the pay gap issue, but in a response to a statement from the Rev. Jesse Jackson, Sheryl Sandberg, the company’s chief operating officer, did say that Facebook is committed to having more diversity in its ranks. She also announced that when hiring new board members in the future, the company would use the “diverse slate approach,” which involves considering at least one candidate from an underrepresented group. Facebook has previously committed to using the diverse slate approach in hiring in other areas of the company.
SEE ALSO: Mark Zuckerberg is acting like a man who can’t be fired — and the unique way his stock is structured could be why
Join the conversation about this story »
NOW WATCH: FACEBOOK COFOUNDER: How I negotiated with Mark Zuckerberg for a $500 million stake