I move:
That Seanad Éireann condemns the Government for its gross mismanagement of the flotation of Eircom which resulted in financial hardship for hundreds of thousands of small investors who were misled by the Government's statements and exhortations.
I move this motion not from the point of view of condemning the commercial activity of Eircom or running down the company in its current format, but to highlight the Government's performance in this episode. Small shareholders, many of whom had never dealt in stocks and shares, have lost most of their savings in this flotation. The public relations people, spin doctors and consultants essentially cajoled them out of their money.
September of this year will go down in the annals of history for the one cataclysmic event that occurred on 11 September. The dreams of many thousands of people ended forever in New York and Washington on that day, but at 3 p.m. on Friday, 28 September, the financial dreams and hopes of hundreds of thousands of Irish investors ended with the announcement that Valentia had gained more than the 80% acceptance level needed to gain control of Eircom. The statement added that the offer was unconditional and represented 1,868,132,494 of the Eircom shares sold to the public. The chairman of Valentia went on to say that he looked forward to being able to pay the accepting Eircom shareholders their money. That was cold, clinical language for the chief mourners at this corporate funeral, namely, the thousands of Eircom shareholders, some of whom lost their life savings while others lost substantial sums of money as a result of the outrageous marketing ploys the Government undertook to encourage the unsuspecting public to part with their money at the height of a bull market.
A few wise guys who got out early made money in the flotation, but the majority of small investors waited and held on to their shares, to their own misfortune. The majority of shareholders were cajoled by the spin doctors and the PR people to part with their money. In return for the great job they did in the flotation, those PR gurus received the handsome figure of £74 million. The image they manufactured was of a gold-mine for sale, Ireland's own national gold-mine going for a song, as the Minister for Public Enterprise, Deputy O'Rourke, described it. Unfortunately, for the majority of shareholders, the national gold-mine turned out to be nothing more than corporate quicksand in which they got bogged down and badly burned. Many investors will never return to the stock market and, consequently, they will miss out on many genuine opportunities to make some real money in stocks and shares.
The Government has to take responsibility for the debacle of the Eircom flotation. It cajoled small investors to part with their money through a massive publicity campaign. The Minister for Finance should make some restitution in the forthcoming budget and Finance Bill whereby those small investors can offset their losses against income tax. Currently those losses can only be offset against capital gains tax, but, unfortunately, many small investors affected never held shares previously and, as a result, will not be able to offset their losses against capital gains tax. I call on the Minister for Finance to consider these investors when presenting his budget this day week and make some allowance whereby those who have lost substantial sums of money can offset that loss against their income tax.
It behoves the Government to make some amends for what happened in this flotation. Many people have suffered major financial hardship as a result of the publicity that surrounded it. The Government and the marketing gurus interfered with the market and created a false market which did not exist previously. Instead of letting the banks and institutions get burnt if the market fell, they inveigled small shareholders into the market. It is very doubtful if the banks, had the flotation been underwritten entirely or to a large extent by the financial institutions, would have accumulated the type of losses small investors suffered.
This motion has nothing to do with the commercial viability of this company or its current commercial operation. I am not impressed by the fact that this private company is now owned by a consortium of American venture capitalists who will relaunch the company on the stock exchange in a few years, having sold many of its valuable assets and properties. In my home town, Ballina, a new building which was constructed by Eircom in the past few years at a cost of millions of pounds is now lying idle. I am sure it will appear in the property pages of the national press in the next six months. This is only one small example of what will happen with the company.
On 28 September the chairman of Valentia announced that the group had received more than 80% of the acceptance level it needed. He did not say anything about the people who did not accept the offer or did not return their forms, many of whom are sitting on their shares in the mistaken belief that they possess a valuable asset which will, at some stage, increase in value if they hold to it. They need to be told that, even if they hold on to their certificates for the next 99 years, the value will not increase by one penny. The Government shows no urgency to inform these investors of the position. There is an ongoing argument about whether Valentia can acquire these shares compulsorily. I have been informed it can.
That this company is now owned by a consortium with no public service obligation to this country, whose sole interest is commercial and which will require the company to make substantial profits in the years ahead, makes me extremely worried about peripheral rural areas such as north Mayo where it will it not be economically viable to roll out broadband and other facilities needed in the telecommunications business.
Let us not forget that telecommunications is a vital cog in a modern economy. It is expanding from year to year and its value to an expanding economy cannot be underestimated. In the past ten years alone our telecommunications system has been brought to a remarkable point. We all remember when one had to phone the local post office for a connection to America and half the village knew what one had talked about by the end of the night. That is not so long ago. There is much for which to be thankful in terms of our telecommunications system.
This House deplores the fact that the Government got it badly wrong with this flotation. It should take responsibility for its error and make amends with the small investor for the shortfall.