Selling Public Assets: Techniques and Financial Implications

Clearly, the UK government's privatization program has been a large-scale exercise in new capital issues. There are 3 main considerations that may have influenced the form of the asset sales: 1. extent of ownership, 2. costs of sale, and 3. disruption to markets. Little evidence exists that the first 2 objectives are being met; costs have been high, primarily as a result of the underpricing of assets, and large personal shareholdings have been maintained only for very short periods of time. There appears to be a simple way to avoid high costs by staggering the sales, which would also reduce disruptions to the equity markets. Furthermore, there is no clear statement as to why huge corporations have to be brought to market in a single sale. Analysis shows that accounting conventions give misleading impressions of the effects of asset sales on the private and public sectors.