Royal Mail shares jump sharply on market debut

 

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Royal Mail shares rose 38% to 455p in their first day of conditional dealings on the London Stock Exchange.

The hugely oversubscribed sale was priced at 330p a share, valuing the 500-year-old firm at £3.3bn. At one point, the price hit 459.75p.

Private investors received 227 shares each. In all, more than 225 million shares were traded on Friday.

Business Secretary Vince Cable told Channel Four News he could have charged a higher price for Royal Mail shares.

Asked if he could have raised the sale price when he saw the level of demand for shares, Mr Cable said: "I could have done and I could have joined the speculators and spivs.

"I'm not interested in doing that," he said.

The shares are listed officially next Tuesday, but City institutions began conditional dealings on Friday.

Some 10 million shares were traded in the first 30 seconds when the market opened. Stockbroker Hargreaves Lansdown reported that its website was having "intermittent problems" due to the "unprecedented interest" in Royal Mail.

Tom McPhail, the firm's head of pensions research, said it was "extremely sorry for the delays", but was making "significant progress in clearing the backlog" and hoped to have all systems running normally again soon.

"We have experienced demand this morning which has gone off the scale," he said.

"We now have six times the normal number of staff working on our dealing lines. We know we are not the only broker affected by such problems this morning."

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Something does seem to have gone a bit cock-eyed with the sale”

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The price rise is likely to fuel debate over whether the sale of Royal Mail has been undervalued. Mr Cable has insisted that the taxpayer has not been short-changed by the privatisation.

But the general secretary of the Communication Workers Union, Billy Hayes, described the sell-off as "a tragedy" and predicted that it would make "not one scintilla of difference" to employees' intention to vote for strike action next Wednesday.

Mr Hayes told BBC Radio 4's Today programme: "This is a sham, really. The company has been undervalued.

"It's basically David Cameron rewarding his mates in the City. Vince Cable, one of the cleverest men in British politics, has made one of the stupidest decisions he is ever likely to make as a politician."

'Froth and speculation'

Mr Cable told the Today programme that the bulk of the shares had gone to "long-term stable investors" in the UK.

He said any volatility in the Royal Mail share price over the next week or so was of little consequence. "What matters is where the price eventually settles in three or six months' time".

Mr Cable said: "You get an enormous amount of froth and speculation in the aftermath of a big IPO [initial public offering] of this kind.

"The bulk of the shares have gone to long-term institutional investors, stable investors, some overseas investors, but mainly British pension funds and insurance companies who are there for the long term.

"The objective of the exercise, which fits in with what we want for the Royal Mail, is to make sure it has stable, long-term investors."

Voting in the strike ballot will close on 16 October. Under the current rules on industrial action, the earliest possible date for a strike is 23 October.

In the flotation prospectus, Royal Mail warned that labour unrest posed a potential risk for the share price.

Mr Cable said a strike was not in the interests of Royal Mail.

'Dazzling debut'

City analysts said the price rise was driven by big institutional investors' demand for the stock. Matt Basi, head of UK sales trading at CMC Markets, said investment funds were "queuing up to make big purchases".

Joe Rundle, head of trading at ETX Capital, called the surge in Royal Mail shares a "dazzling stock market debut".

But he said factors such as the threat of industrial action, a lack of adequate capital and unclear growth strategy could weigh down the stock price in the future.

Graph showing Royal Mail share price
 

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  • rate this
    +2

    Comment number 131.

    So I got my £750 shares. A tiny tiny part of Royal Mail. Probably I own Postman Pat's cat.

    It is the big institutional investors that have made a killing on this, not the public.

  • rate this
    -1

    Comment number 130.

    I don't see how this is bad deal. Most of the shares have gone to pension funds to benfit from the 7% dividend, no one has a good word to say about the current state of Royal Mail due to their service; and their prices aren't competative. For a small parcel: DHL £16.95, TNT £13.98, Royal Mail £22.12. If you want to invest, wait for Twitter IPO.

  • rate this
    +25

    Comment number 129.

    A total and utter National scandal yet again by those in power.

    Selling a National asset off cheaply to their wealthy friends to make a killing.

    Career Politicians of all colours are a total disgrace.

  • rate this
    -1

    Comment number 128.

    mythoutz, you can sell them sooner. You will just pay tax on the gain.

  • rate this
    +8

    Comment number 127.

    Anyone notice how all our privatised industries are still funded by the public?

    Just like our government.

  • rate this
    +7

    Comment number 126.

    Welfarer@81.
    You can't e-mail a pair of shoes!
    I've worked for RM for 35yrs and these last 4yrs the number of pkts sent has doubled,thanks to internet shopping...and will continue to grow. It's a goldmine and the tories know it,thus they sell it to thier friends in the city.
    In the long term...RM will like the gas/lecky..be foreign owned and like gas/lecky,we can look forward to 8% hike in price

  • rate this
    +6

    Comment number 125.

    The RM privatisation is tragic and I expect the results will be that it will eventually be owned by foreigners so the profits will go abroad, prices will go up, services will go down, many RM workers will be made redundant and boardroom fat cats will get bonuses. The Left now have to think about consumer boycotts of companies to stop the worst excesses.

  • rate this
    -66

    Comment number 124.

    Personally I think about efficiency
    You look at the way the government privatised institutions
    And you know that they then work better

    They have done well to sell the Post office, but please privatise the Border force, London transport and perhaps even the BBC

    Russians, the middle East have money to pump in these institutes and make them better?
    FACT

  • rate this
    -5

    Comment number 123.

    To all those out there who are moaning about those that bought shares, tough on you and don't call people like me who managed to scrape 750 quid together to buy them. I don't spend my money in Weatherspoons, nor do i have a Tv the size of a football pitch, nor do i spend vasts amount on takeaways, mobile phones and all that other cr@p that society trys to make me buy. Get over it!!

  • rate this
    +6

    Comment number 122.

    Once again the tory party have ripped of the public, this privatisation has nothing with serving the public and everything with the few gaining greater wealth while the many suffer through increased costs and reduced service.

  • rate this
    +1

    Comment number 121.

    I may be wrong: I wonder how many of those private individual shareholders who were allocated shares have been able to sell them this morning? My point being that those 'inside' City institutions will know if they had shares and will have been better placed to sell. At least those individuals who had thousands to invest in these shares lost out in the feeding frenzy this morning...

  • rate this
    +2

    Comment number 120.

    The flotation price is just another reason for people who are against privatization in principle to moan about. As we all know, the value of investments go down as well as up.

    Royal Mail should be allowed to compete fairly against the new providers, who only cream-off the profitable commercial contracts. The principle of a standard price for a letter delivered anywhere in the country is at risk.

  • rate this
    +7

    Comment number 119.

    Every UK citizen who pays taxes owns the Royal Mail, because our taxes built the Royal Mail and other publicly owned companies! The governments doesn't have the right to sell it... Only those with enough spare income will be able to purchase shares, which means it is being stolen from those who have had to contribute to its existence through taxes! It's THEFT pure and simple!

  • rate this
    +3

    Comment number 118.

    As the number of shareholders diminish...the large institutions, who will have paid more, will require a return on their investments and will demand cost cutting and sell offs...as will the management who will have received an increased share of the business.
    Just how many shares did the higher management of RM receive...Does anyone out there know the answer to this.?

  • rate this
    +22

    Comment number 117.

    Another old UK institution sold off by here-today-gone-tomorrow politicians for short term political gain. The fact that it was undersold only rubs further salt.

  • rate this
    +7

    Comment number 116.

    It's not the price that matters, it's the ideology. Tories and their poodles were mustard keen to get shot of this national institution, so rather than take a gamble on a fair price and good value for the taxpayer, they practically gave it away.

  • rate this
    +3

    Comment number 115.

    I hope we get just as fair a deal with the new royal mail as we have with all the other sell offs gas/electric/water etc.Sarcasm! How dare they sell OUR Royal Mail...If I understood correctly, I was already a shareholder in the great Royal Mail via my/yours taxes! Mind you if our politicians are all 'sold off' bought and paid for goons then what do we expect?? I'm voting UKIP next time!

  • rate this
    +7

    Comment number 114.

    It stinks.

  • rate this
    -10

    Comment number 113.

    If there were 700,000 individual applications, then bearing in mind that anyone with the dosh will have applied on behalf of their children, grandparents, cat, goldfish etc, that suggests there may only be 350,000 "hard-working families" in the country.
    Hardly a broad electoral base, and coincidentally a good match with the circulation of the idiotic newspapers which these people tend to read.

  • rate this
    +3

    Comment number 112.

    lovely that the R.M. staff are the most who stand to profit - and at no cost to themselves. £2000 in shares has now become £3000 - brilliant!

 

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