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Tuesday, February 07, 2006 

Eircom Flotation Flashback

Scannal! on RTÉ yesterday evening recapped the whole Telecom Éireann/Eircom privatisation debacle. As the listing on RTÉ's own website puts it:
"The much anticipated [Eircom] flotation day finally arrived on 9th July, 1999. Mary O'Rourke - then Minister for Public Enterprise, Charlie McCreevey - then Minister for Finance, Taoiseach, Bertie Ahern and Telecom CEO, Alfie Kane revealed the share price - €3.90 per share.

Only one in ten of the almost 600,000 new shareholders sold their shares for a quick profit. Most people were in for the long haul. Flotation fever turned to mild concern when the share price reflected market unease and began to trend downwards.

But the message from above was quite clear: 'don't panic. Everything will be all right.' The Government gave the added incentive of an end-of-year share bonus if people held on till then - and that's what most of them did.

But the share price continued to go in one direction only and that was down. Disbelief turned to anger as it emerged that executives and company directors had received huge bonuses and stock options on foot of the flotation.

Senator Shane Ross and broadcaster Eamon Dunphy took up the fight. Angry shareholders beseiged the board of directors for hours at the company's first AGM. Anger turned to fury when former Tánaiste, Dick Spring explained he didn't have the cash to buy shares, when he was invited to join the board as a director. People felt they had been made fools of.

The sorry tale went from bad to worse. Eircell, the most profitable wing of the company was sold off to Vodafone and a battle royal between Denis O'Brien and Tony O'Reilly began to take over the rest of the company. It was the employees with a blocking share who chose O'Reilly's consortium, Valentia, because they offered them the best deal - doubling the workers' shareholding in a very lucrative tax-efficient way.

Within three years of being floated, the company was taken private and the small share holders compulsorily paid off. The dream had died.

Most investors lost almost 36% of their original investment. Once bitten, twice shy: many were determined never to purchase another share in any business, ever again."
As the program related, the cause of so many small investors getting burned was that McCreevey (part of the PD-sympathetic circle ascendant within FF) was anxious to extract as much money from Joe Public for his or her shares as possible, resulting in the share offer price being set unrealistically high.

But the interesting part was a quite curious omission in the account told during this program, one that we've noted before; and it has to do with the employment of Senator Ross (he who so hounded and humiliated the initial post-flotation management into bailing out).

"Libel"-Richard Waghorne
"Attack blog"-Damien Mulley

About me

  • An early-thirties male Irish technologist living and working in Dublin, I'm a former (recovering) member of both Fianna Fáil and the Roman Catholic Church.

    I'm not a member of any political party these days, but my opinions can be broadly categorised as 'lefty' and republican. I am also a former member of the Irish Defence Forces.

    Please feel free to check out the FI Fie Foe Fum group blog, where I was once a regular contributor, and the Cedar Lounge Revolution, where I can usually be found in the comments.

    (This blog and its contents reflect only my own personal opinions as a private citizen, and not those of any other person or organisation.)

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