O'Rourke accused of `debacle' over flotation of Eircom shares

Fine Gael accused the Government of withholding information from Eircom share purchasers at the time of the company's flotation, during a debate in private member's time.

The party's spokesman on public enterprise, Mr Ivan Yates, claimed the "debacle" had caused very serious damage to the credibility of future State retail share sales. "The prospects of other first-time shareholders taking a chance again and trusting the Government are very slim indeed."

The Minister for Public Enterprise, Ms O'Rourke, accused the Opposition of ventilating "half-truths, innuendos and madcap conspiracy theories".

"I very much doubt whether these shareholders will welcome their company name being dragged through the Dail chamber with its attendant dangers. It may provide a quick, opportunistic headline for Fine Gael, but at what cost to the company and its shareholders?"

The Fine Gael motion, which will be voted on tonight, condemns the Government and the Minister for failing "to fully and adequately convey to potential Eircom share purchasers the likelihood that KPN and Telia (Comsource) would sell their shareholding at the earliest possible date because of the reluctance of the Government to allow them to increase their shareholding to beyond 35 per cent, and the lack of transparency of the view of Eircom management as to the real value of the shares at the time of the IPO, which may result in significant losses for many individual shareholders who were not aware of these factors at the time of their purchase".

Mr Yates said that the longterm investor had been worst hit by the drop in share prices. "Those short-term, speculative `bed and breakfast' dealers have long since departed with their profits. As of close of business last Friday, an investor of €17,000 worth of Eircom shares would be showing a loss of approximately €4,000. Many borrowed to purchase these shares in their certain belief that they could trust the Government."

The Minister, he added, had stated that she was obliged to accept the advice of the Government's advisers Merrill Lynch and AIB Capital Markets. But the Minister had readily and recently rejected expensive consultancy advice relating to Luas and Aer Rianta, he added.

Ms O'Rourke said nobody in any country could make a commitment that the shares of a floated company would never drop in price. "I never made any such commitment at the time of the Eircom float. Even if I wanted to, the strict laws relating to the listing of companies on the Irish and international stock exchanges would have prevented me from doing so.

"Deputies will know I have no responsibility relating to either its commercial operations or its capital structure. Deputies will also know that, in the 11 months since its flotation, the share has traded at or above its flotation price on all but 38 out of 233 trading days."

She noted that The Irish Times in an editorial had observed that the Government appeared to have pitched the flotation price of £3.07 at precisely the right level, and that anything less would have left it vulnerable to the charge that the company was being sold off cheaply.

The Labour spokesman on communications, Mr Brian O'Shea, said whether or not the Minister had maximised the return to the Exchequer was to some extent a matter of conjecture. "Advice and consultancy services cost €80 million. That is a very large sum of money, and there is a need to analyse the expenditure to establish whether or not this represents value for money, what mistakes were made which can be avoided in the future"