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
    -1

    Comment number 651.

    Something that was undervalued also turns out to be underpriced....
    Quelle surprise.

  • rate this
    -1

    Comment number 650.

    Gas, Electric, Water, BT, Coal, Railways and Royal Mail
    All these Sales should be taken back by the Country. We do not have to pay to take back what was Stolen from us. The Thieves have had years of Profit & Share dividends way above the rip off price they paid.

  • rate this
    0

    Comment number 649.

    Shares are expected to go up just as they did for other denationalised companies then the bubble will burst when the excitement is all over and share prices will slope down on the graph.
    My shares I have to wait a min of 3 years before I can sell will likely only be half the value from today.

  • rate this
    -1

    Comment number 648.

    The new proprietors will now set about the task of "Union Busting".
    That's when a firm is employed to single out and victimise Union Reps like the Burke Group based in California.
    They will set up an inhouse rival to the CWU, which will just be like a school council.Then after a few years of bullying they will set about trying to de recognise the Union with a view to lowering wages.

  • rate this
    0

    Comment number 647.

    Sold off cheaply and all set up so city men could make a fast buck. for anyone to say differently they are living in a dream world. And no I am not a Royal Mail employee or a union man. All you people who are defending this episode, shame on you and shame on the people who are going to be responsible for prices that will sky rocket in the very near future.

  • rate this
    -1

    Comment number 646.

    625.brora
    I bet all the people gloating they made a fast buck are the same ones who complain about rail, gas, water and electricity prices. Some people can't join up the dots.
    ---
    Highly unlikely.
    The ones who made money on RM will also have shares in SSE Centrica & Nat. Grid, etc, & will have the dots joined up very nicely thank you.

  • rate this
    0

    Comment number 645.

    Westminster, it seems, is little more than a naive instrument of Mammon.

  • rate this
    +6

    Comment number 644.

    The Cons have given their paymasters in the City another helping hand to make more riches, at the taxpayer's expense. Prime London property worth billions have been sold for next to nothing. Asset stripping will be the next steps by the Royal Mail to pay the city handsome dividends.

  • rate this
    +4

    Comment number 643.

    626. ConnorMacLeod
    you only found out for sure AFTER the shares hit the market. Hindsight is a wonderful thing

    Didn't take a genius to work it out. Spivs selling to spivs. For those of us that use RM as business customers, this is a disaster. We need is certainty. No one has a clue how privatisation will affect our postal service, but if its anything like other privatisations the outlook is bleak

  • rate this
    +5

    Comment number 642.

    With all the professional advice, surely HMG knew no one would get more than the basic minimum so why the charade of a pull down menu offering higher amounts? HMG is now holding millions of £'s of people's money in the form of a massive free loan. Personally I feel I've been mugged and I'd like to know what happens to all this interest that people have lost from their savings accounts.

  • rate this
    +3

    Comment number 641.

    Most of these "small investors" will sell their shares ASAP for a quick profit, just like in the privatisations of the 80s. The big institutions will snap up the shares as will any predator companies hoping to get control of the Royal Mail. The government just wanted a quick buck & to shed responsibility for another once great British institution. No ideology here.

  • rate this
    +10

    Comment number 640.

    611. AuntieLeft
    More public sector workers now entering the real world and see what it is all about.

    Having worked in both I found no difference in effort put in.
    Funny, this hatred of the public sector didn't seem to exist until after the private sector employees chose to opt out of company pension schemes and gamble on the 80's boom lasting forever. Quite happy gloating about high pay then!

  • rate this
    -3

    Comment number 639.

    625. brora

    The one's who complain about that don't invest, they waste their money items not necessary to survive.

    People who invest.. create long term prospects an they often keep these people who moan in work, with the money they took a risk with investing in the first place.

  • rate this
    +5

    Comment number 638.

    So ends another national asset.

    Much as I detested Thatcher, even she would not touch this one.

  • rate this
    +10

    Comment number 637.

    So privatisation needed as the Internet is killing off letters? But the Internet is also responsible for huge rise in parcels and packages...
    If its future is so bad why are the greedy rushing in?
    Following public investment, Royal Mail makes a profit - a useful direct UK revenue stream. Why privatisation?
    We built and paid for it - politician chums get the gravy – as usual and as predicted.

  • rate this
    +6

    Comment number 636.

    I wonder how much the investment mangers that look after Dave and Gideon's trusts made for them on this one.

  • rate this
    +5

    Comment number 635.

    @ 626. ConnorMacLeod

    Many people didn't want it to be sold in the first place.

  • rate this
    +7

    Comment number 634.

    605.C Weir
    And people say this has cost the taxpayers money... it hasn't!


    ++
    YOU'RE 100% WRONG

    Royal Mail sold for £3.3bn
    Government took over Royal Mails pension, the pension fund is approx £10 BILLION in deficit, which means it OWES more, than the pension fund can pay out.

    Take £3.3bn away from £10bn & taxpayers are now responsible for a approx extra £6.7bn LIABILITY/DEBT

  • rate this
    -4

    Comment number 633.

    This wasn't a scheme for the rich. If you applied for £10k and you weren't an employee, you got nothing. If you applied for £700, you got your whole allocation.

    It was set up so Joe Bloggs could buy some shares - not Mr Bank & Co.

    I don't like neconservatism, but lets not exaggerate the situation. The Gvnt still owns a large share.

    Who remembers 25%+ inflation? That's red for you!

  • rate this
    +9

    Comment number 632.

    Thank goodness the LIB DEMS are in coalition

    They make such a difference.

    Get your Lib Dem memorabilia now - will only be available until 2015 when it becomes a thing of the past!

    What exactly have they moderated? Selling your soul for power and the "AV" referendum - waste of space and public money!

 

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