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 311.

    Made a couple of hundred quid today - should just about cover all my stuff they have lost over the years!

  • rate this
    +1

    Comment number 310.

    @269
    This has to be a spoof account.

  • rate this
    0

    Comment number 309.

    The Realist@251.
    Rubbish.
    The UCW has been on board every change RM has made,whether it be coding mail/ceasing the TPO's/rail to road/the way forward/OCR's/ and many more "improvements"!
    These improvements have latterly given us later starts,p/t..casual labour/no Sunday collections,and more.

  • rate this
    +4

    Comment number 308.

    288.ValleyBoyGalactico
    Selling off a national asset for half its real value
    -
    Based on what? Labour shadow minister who couldn't make up his mind if he was for or against it?

    Share prices is based on the expectation of future earnings. Just take a look at Apple and its assets. RM made a profit because it took advatange of its monopoly to hike up prices. I wouldn't bet on its future profits

  • rate this
    0

    Comment number 307.

    @286 the realist
    The reason why this may work in Germany is that Germany is fairly densely populated in most areas, with major cities in all the regions. However, in the UK I somehow fail to see how private companies intend on keeping shareholders happy, will compete to deliver parcels from Land's End to John O'Groats - unless price is extorniate.

  • rate this
    +3

    Comment number 306.

    Remind how much was Mandelson and Labour going to sell 30% for?

  • rate this
    0

    Comment number 305.

    254.dungolfin

    Has anyone lost their jobs??!!?

  • rate this
    +1

    Comment number 304.

    Yet again the chance to buy something we already own, except it wasn't a chance. The big institutions got their hands on it whilst the small fry were limited to £750. Gideon got £3billion for RM and has taken on £10billion of pension liability, good job he's in charge of the countries finances.

  • rate this
    +4

    Comment number 303.

    80's privatisations lined few pockets with the excuse of lack of investment and poor mgmt., which was bull then and still is. Now we foot the bill for RM pensions. If the controlling interests hadn't stolen our pension pot 'surplus' back then, there wouldn't be a shortfall now. More tory theft and greed.

  • rate this
    +4

    Comment number 302.

    OK so the shares were undervalued, but this was a chance for the Govt to give the economy a kick start by injecting far more money into a lot of ordinary people's pockets. By limiting so severely the number of shares to 227 once again the city slickers have won out against the small guys who have propped up the banks and taken the hit for so long with higher bills and no wage rises. No surprise!

  • rate this
    +2

    Comment number 301.

    Hands up, whos really surprised by this? any1?

  • rate this
    +4

    Comment number 300.

    Yeah?
    And just WHAT are you going to do about it?

    Vote back in the people who undersold the nation's gold reserves?
    Brilliant.

    What use is democracy if it is implemented by the self serving and the knaves of big business?
    No use what so ever. You cannot vote your way out of a burning building or bowel cancer any more than you can vote your way to a prosperous caring nation.

  • rate this
    +3

    Comment number 299.

    263.Simon

    Hello Simon. Your upper case shift key seems to be jammed. It's that big key on the left. Press it, release it, and then try typing something. See how much better it looks? Less manic, and a little easier for us to read.

  • rate this
    +2

    Comment number 298.

    As all the other publically owned utility sell offs, the crooks in the House of Conman's have cynically pitched it just before Christmas. They know the average person in the street is likely to be hard up just before Christmas and sell them whereupon their mates in the City will clean up.
    Where is Guy Fawkes when you need him?

  • rate this
    -2

    Comment number 297.

    And what happens if you don't want to set foot in your dentist, local supermarket, railway station.... live in the real world mate

    291. ToriesPutriaSuntSubmersionisMasculorum
    What happens if I don't want a tax dodging private sector company coming onto my land to deliver mail.

  • rate this
    +1

    Comment number 296.

    As the small investor buys only to sell quickly for the profit this is yet another public company handed over to the for-profit institutions, being the ultimate destination for all those small allocations.

  • rate this
    -9

    Comment number 295.

    Well, yesterday I had £10000, currently I have £14350, how good is that, I think it's great to work for Royal Mail. Long life and Hapiness to the politicians of whatever party

  • rate this
    +2

    Comment number 294.

    The problem I have with this is not one of private vs public investment, but one of enfranchisement. For example, the NHS is *OURS*, even for those of us healthy at this moment. It is a public asset and concerns us all that it is well funded and managed.

    Royal mail used to be a public asset dedicated to supplying mail to all people in the country. Now it’s just a haulage firm.

  • rate this
    +5

    Comment number 293.

    I wonder how much the RM's pension scheme will cost those unlucky enough not to get shares?

  • rate this
    +3

    Comment number 292.

    the city are the people who advise the government at what price to sell the shares, the conversation goes
    Cameron, osborne , Clegg & Cable: how much do you thing the royal mail is worth
    Goldman Sachs: only about 3 billion if you keep all the debt
    Cameron, Osborne, Glegg and Cable: ok sell it and what is in it for us?
    GS, a very well paid job in 2 years time

 

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