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."

Start Quote

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
    -8

    Comment number 511.

    Why is it that the thought of anyone making a profit from shares is wrong, like most things it is a risk those that bought may have made a loss today happily not.
    Lets hope anymore government sell offs are equally well priced, cheap bank shares spring to mind.

  • rate this
    +4

    Comment number 510.

    I HAVE IT!
    Privatise the 999 emergency number!

    No more do we have to have a publicly funded, free at the point of delivery, easy to use service that does nothing but make a loss.

    Deregulate the summoning of emergency service!
    Dial 9 for Virgin Assist! Only £2 a call!
    Dial 999 for 118 E-Assist! Only £4 a call!
    Dial 987637221 for the free service ran by a charity.

    There is no downside to this!

  • rate this
    0

    Comment number 509.

    Its unlikely parcel prices postage etc will rise steeply, there is massive competition from hundreds of firms. For example medium parcel 1.5kg recently sent by Royal Mail cost £8.00. 4 Large parcels 60Kg sent (RM competitor) cost £11.99. The new shareholders carry no small risk.

  • rate this
    -1

    Comment number 508.

    Are they paying dividend ? If the royal mail staff strike they will lose money from their shares an might even lose dividend's.

  • rate this
    -1

    Comment number 507.

    Perhaps Royal mail might improve with a sell out. I am very lucky to get my mail before 3.00pm despite only living four hundred yards from the sorting office. Not many years ago Our mail was guaranteed between 8am and 9.30am Total shambles if I want early mail I have to pay extra to have it delivered early.

  • rate this
    +5

    Comment number 506.

    Michael, you missed moving MP's onto Zero Hour contracts.

  • rate this
    -1

    Comment number 505.

    RM share valuation is no different from other stock. BBC reported "Facebook's shares lost half their value in their first year. When it made its stock market debut in May 2012, the appetite for shares was enormous. Priced initially at $38 per share, the stock soared within hours of its debut to a high of $45. But its stock later slumped" Nothing can be assessed by today's RM price surge.

  • rate this
    +3

    Comment number 504.

    495 "It was Gordon Brown that actually sold off all our gold at rock bottom prices.
    "

    Brown sold the gold cheap because several London banks had massive short positions on gold & were about to get blown away

    Subsequently they realised they could bet against the taxpayer all day long and did precisely that till they nigh destroyed us all in 07/8

    Brown was poor but THAT one was the CoL

  • rate this
    0

    Comment number 503.

    What I find rather strange about the whole process is that magically the total number of people who requested under £10,000 of shares were entitled to the exactly the minimum value ,i.e. £750, that could be applied for! This is truly excellent forecasting and bordering on the uncanny......

  • rate this
    -5

    Comment number 502.

    441. sue wright

    Oh dear. So many errors - where to start?

    - 875,000 working days lost to strikes in past 5 years.
    - Voting to strike TODAY
    - 264,000 1st class letters late EACH DAY
    - 2nd delivery already gone
    - What has Rail subsidy got to do with this?

    Well done for showing us the level of intelligence of your average Labour activist though.

    PS I am not your "Sonny". Nor are you my "Mum"

  • rate this
    +2

    Comment number 501.

    @420. Keep yer cheque book handy then WW...cos you'll need it soon!

    That is,to pay for visits made to see your friendly local, large corp sponsored GP, EVERY time you get a cough you just can't shift with the over -the-counter stuff you've just bought from the chemist once privatisation occurs.Be careful what U wish for.. Even if U do happen to make a few bucks for yourself in the beginning??

  • rate this
    +4

    Comment number 500.

    Please people who are like me who have never voted in their life, please go out and vote in the next election for a party that isnt named Labour, Conservative or Lib Dem. Even if its for the Raving Looney Party, anything has got to be better then watching rich people get richer, and poor people get poorer.

  • rate this
    +9

    Comment number 499.

    Oh to privatise Parliament! Flog off the assets, remove the subsidised cafes and bars and of course cut staff numbers and income. 300 MPs on something that "meets national minimum wage". That should concentrate their tiny minds. Especially if we add the threat to "downsize" further or outsource the work.

    Any ideas how we can do this?

  • rate this
    +7

    Comment number 498.

    To the fast buck brigade on here I say get a moral compass - this was an absolute disgrace and you all know it but then you probably believe that Judas was right to take the money too.

  • rate this
    +3

    Comment number 497.

    Somebody/bodies, somewhere has just lost a billion pounds of tax payers money! I trust they are clearing their desks as I speak.

  • rate this
    -3

    Comment number 496.

    Now we will see how intelligent the RM workers really are. Will they vote to strike and watch their free share ownership drop in value or will they start working harder and more efficiently to make their company worth more.

  • rate this
    -1

    Comment number 495.

    477.salvador said: "yet another Tory govt fails with its economic policies so sells the countries crown jewels"

    It was Gordon Brown that actually sold off all our gold at rock bottom prices.

    At least if RM is a success the Gov still own 42% of it.

    With Gordon, our money simply ended up paying some households £50k a year in benefits.

  • rate this
    +3

    Comment number 494.

    458.Griff-rhys the volume of letters posted may be reducing (shame on all of us for losing our letter-writing skills) but the volume of packets and parcels has dramatically increased with the advent of internet sales / purchasing from abroad.
    Add in all those 'buy online and post' card services and you have your answer as to why postal services are still much in demand.

  • rate this
    +5

    Comment number 493.

    Come on! Does anyone think those investing today in Royal Mail are looking at doing so in the long term?

    I can see this being a huge disaster for the not only the British public, but many small businesses who will struggle to pay the ensuing rise in postage costs.

    There's trouble ahead.

  • rate this
    -3

    Comment number 492.

    This just shows that the Tories are in league with devil and because of this, the freedom and liberty of all good people is at stake
    Hey, I like this paranoia thing, where can I get some more?
    The BBC - Labour Party joint collaboration on scaremongering?
    What was that illegal substance that was proved if you smoke increases paranoid delusion?
    Good news more public sector entering the real world

 

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