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
    +6

    Comment number 571.

    Anyone else smell a rat ?

  • rate this
    +8

    Comment number 570.

    If this is such a bad move then let's see if Labour nationalise it when they get back in power.

    You know, like they did with Gas, Electricity, Railways, BT, BA.........

  • rate this
    +2

    Comment number 569.

    How are small investors trading already if only City institutions began conditional dealings on Friday and the rest on Tuesday.

  • rate this
    +8

    Comment number 568.

    Day in Stats:
    700k got shares of 63.7m in UK.
    1 in 91 people made £250
    90 of 91 people were sold short by £700m - a loss of £11.11 each

  • rate this
    +5

    Comment number 567.

    Typical government, flogging off the country's institutions on the cheap to line the pockets of investors while the service-users suffer. Thatcher would be proud...

  • rate this
    +6

    Comment number 566.

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

    Hmmm...Give it time Mr Cable, give it time.

  • rate this
    +9

    Comment number 565.

    I know 3 people who retired at fifty after getting the max shares from the previous privatisations; and carpet-bagging the then building societies.

    What was the slogan at the Tory Party this year "For hard working people."

    Who do they think they are kidding!

  • rate this
    -2

    Comment number 564.

    Just got on (3.00pm) to Hargreaves Lansdown after they crashed. An absolute disgrace for a Footsie100 company, particularly as they charge high and opaque fees peddling unit trusts.

  • rate this
    +3

    Comment number 563.

    @547 - "three times as much junk mail as we had before"
    That's what the MPS (Mailing Preference Service) is there for. You can register with them and then every UK business that sends Direct Mail is legally bound to screen against the MPS database. It won't stop it all but it does work in the main. So that is not much to do with Royal Mail. They don't produce junk mail; they just deliver it.

  • rate this
    -1

    Comment number 562.

    I think the shares were properly valued but that due to speculation of quick profits the share price has rocketed. Do you use the post? I don't anymore, not even to send Christmas cards.

  • rate this
    0

    Comment number 561.

    I used to send parcels Royal Mail but it became far too expensive so now use other service such as Collect+ and myHermes.

    They need to modernize quickly otherwise they will get left behind. This wasn't happening as a publicly owned company as there was always the government to step in if things took a nose dive.

    About time it was sold off.

  • rate this
    +7

    Comment number 560.

    540. ioioos -Gold plated pensions? I think you have the Royal Mail mixed up with Westminster. You do realise we are still saddled with having to invest in private rail companies despite them being in private hands so its still costing us. The Royal Mail is profit making and was adapting to a changing market, 5 years down the line they will be asking us for cash despite shareholder profits.

  • rate this
    -9

    Comment number 559.

    This is not the same as the energy/water/rail privatisations because most of RM now competes in a true market - parcels (letters are in decline anyway).

    There are already many alternatives to RM, it must compete on price and service or it will die, so the consumer and businesses will be better off.

    That is if the marxist unions don't drag it down.

  • rate this
    +4

    Comment number 558.

    http://www.bbc.co.uk/news/uk-24487146

    Doesnt even make it onto the home page of BBC News, this is what people are more bothered about then, rich people getting richer.

  • rate this
    -2

    Comment number 557.

    Very few here comprehend the government fraud. Royal Mail, despite recent profits, was bust beyond repair. Its pension fund liability was £38 billion, with only £28 billion in assets.

    To make it saleable, government absorbed its assets and liabilities. It banked the assets immediately, thus 'reducing this year's deficit' but is foisting the vast liability on to taxpayers for decades to come.

  • rate this
    +4

    Comment number 556.

    So you bought some shares, sold them, and made a little money. There you are with a big smile on your face. Everyone else is laughing at you because YOU don't understand how stupid you've been. Very sad day, for a once respected organisation.

  • rate this
    +10

    Comment number 555.

    512.
    TuRbO-DD


    Royal mail was crashing anyway, most of their competitors do the same job far cheaper....

    ___

    They do not do the same job. They get Royal Mail to sort and deliver it for them. The competition have no post offices nor any post boxes that Joe Public can use. Probably never will have. There is no profit in the Universal Service, except by cutting it down or raising prices.

  • rate this
    +2

    Comment number 554.

    All this has done is 30% insta profits for pointless shareholders - disgusting behaviour how did that benefit the taxpayer ? and why were only city institutions allowed to buy up first ? for those in the club as per usual. its as though the government wants to hollow out government UK finance by placing the debt for everything into the public sector, and gifting future profits to private investors

  • rate this
    +11

    Comment number 553.

    327.
    engineer-neil
    1 Hour ago

    I see the envious class warriors are out in force today :-)

    I case it's escaped your notce, the postal workers are about £3k up from what they were yesterday

    ------------

    Great, i`m sure they`ll need that when the asset stripping begins and redundancies are announced. More short term thinking from tories and their supporters.

  • rate this
    +7

    Comment number 552.

    Another crucial public service privatized for profits, they have privatized welfare, railways, energy sector and suppliers to the NHS sooner or later we are going to lose on prisons too and before you know it you will be paying to use a hospital.They are doing it in little bits so they don't cause too much noise, time for action is now.

 

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