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 1031.

    And the Good Fairy waved her wand.
    Telling all of us how much better off we are all going to be.
    Postage Stamps so much more cheaper than before.
    No more delayed mail.
    No more strikes.
    And we all lived happily ever after.
    Well..OK.. some of us did.

  • rate this
    0

    Comment number 1030.

    "The institutions were given around £15bn pounds, ie the profit they made on day 1."

    $15bn LOL..IPO only offered about £2bn+; factor in a 30%+ rise you will soon see how the can't have made $15bn.

    Also just because price has gone up doesn't mean much selling has gone on tp profit.

  • rate this
    +4

    Comment number 1029.

    @1028

    The banks were not nationalised, but the tax payer picked up the tab (and made a loss).

  • rate this
    +1

    Comment number 1028.

    Now Royal Mail has been privatised - how about a name change to reflect that? As it is no longer in HM Queen's Government remit - it no longer has Royal Charter (not government or HM Queen owned).
    http://www.dailymail.co.uk/news/article-1323783/Royal-Mail-lose-regal-title-privatisation-warns-Queen.html

    Am I also assured that if the mail service defaults the tax payer will NOT pick up the tab.

  • rate this
    +4

    Comment number 1027.

    If you bought there shares this means the government has just sold you something you already owned. Except that now you don't own it - majority shareholders do.
    The Tories stole a vital service from the nation and sold it. LibDems let them. And helped them pass the bill to strip any objecting campaigners of funds.
    So what will they sell next - the fire service, police, the air we breathe?

  • rate this
    +2

    Comment number 1026.

    1016. Robertson

    "But what are the facts? Were they making a profit under nationalisation and are now making a loss?"

    Making a profit hardly rocket science? Particularly when you have little morals regarding freezing pensioners & are happy raise your prices by many, many multiples of inflation EVERY YEAR!

    or are you saying a nationalised energy firm wouldnt make money with these huge increases?

  • rate this
    +4

    Comment number 1025.

    A nice earner for all those greedy enough to 'buy' something that belonged to us all. A knockdown price means that the Tories secure the votes of those with a few bob (the unemployed won't have £750 to spare) The shares will soon be sold and Royal Mail will be owned by a massive global company that won't be so particular about awkward addresses in the sticks. And people vote for this shower.

  • rate this
    -5

    Comment number 1024.

    Not one person yesterday said it was underpriced. But now it is all of of a sudden. Again people not understanding IPOs. You could not have an overvalued IPO when you are issuing shares to employees. Imagine if the price dropped 30% (like Facebook) - imagine how angry they would be.

    I don't see how 150,000 workers in the country sharing £400m+ is bad thing.

  • rate this
    +3

    Comment number 1023.

    I am going to make more money than the share-speculators: I'm going to place a bet with a well-known gambling emporium that the price of postage will go up before Christmas!!!

  • rate this
    0

    Comment number 1022.

    I think its great small investors get some dibs before the rich investors.
    I do agree that the service will most probably get worse, they will probably scam the customers like the Electricity & Gas companies do. As for institutional investors grabbing millions, it all helps to go towards my big fat railway pension.

  • rate this
    +2

    Comment number 1021.

    @1016 Robertson

    Everything is about profit is it? If it isn't making a profit then let it fail? Not everything in the world is about profit, not service needs to enrich shareholders and not all returns on investment can be measured in money. Your bank account may make you feel rich but your morals are bankrupt.

  • rate this
    +3

    Comment number 1020.

    1016.
    Robertson "True. But what are the facts? Were they making a profit under nationalisation and are now making a loss?"

    The facts are that privatised companies are still being propped up by the tax payer while making massive profits for share holders and fat cats are still getting massive golden handshakes for abject failures.
    Ideal?

  • rate this
    0

    Comment number 1019.

    Jim 162 workshy posties only work 4 hours a day? where on gods earth do you get your information? I challenge you to lift a full bag of mail and walk the streets non stop for 3 or 4 hours a day, that comes on top of a 3 hour prep and travelling time, do a bit of research before coming out with comments with no foundation.

  • rate this
    +1

    Comment number 1018.

    It'll go the same way as Railtrack. Look what happened to them, they cut corners, made the railways worse, went to the Labour government for more money, they said no, what happened? Railtrack went into receivership and it went back into state hands. What's the betting of history repeating itself because the government sold Railtrack, like they're doing with Royal Mail too cheaply.

  • rate this
    +2

    Comment number 1017.

    Bad news is that a few big hitters have lined their pockets from all this wheeling and dealing.

    High Frequency Traders for example will have bought in low and sold almost immediately. They continue this parctice in millisecond trading buying selling until the price levels... when all their shares are sold.

    So the routine is profit profit profit and sell with 0 contribution at the end of trading.

  • rate this
    -3

    Comment number 1016.

    1007. Mandy Lifeboats
    2 MINUTES AGO
    If privatisation had worked in the past I'm sure that we would all be in favour of this.

    The facts don't lie but the Govt has a different agenda.

    True. But what are the facts? Were they making a profit under nationalisation and are now making a loss?

  • rate this
    +3

    Comment number 1015.

    What was owned by everyone is now owned by a few. The end of another first class service as it falls into the hands of investors where profit will dictate service. Delivering letters to your door will soon be a thing of the past especially if your'e out in the sticks. Any loss making parts, currently held up by the profitable parts of the business are doomed. Then the price hikes will arrive! Sad.

  • rate this
    0

    Comment number 1014.

    In the whole meaning of life thing this is nothing.
    But in the f u we will do as we see fit - with no mandate to do this ,this a big thing. So lets have a referendum on this sale, before they sell, what we own - to people that will pay no tax, and don't forget we will still pay the pensions. Utter bull

  • rate this
    +5

    Comment number 1013.

    The Royal Mail has been sold for less that it is worth.

    A large number of small investors were given a few hundred pounds bonus to buy their vote.

    The institutions were given around £15bn pounds, ie the profit they made on day 1.

    In other words the Tories have taken £300 from every person in the country and given it to institutional investors.

    Why do we accept this?

  • rate this
    +2

    Comment number 1012.

    I wonder if those rubbing their hands at their profit will still be as happy when their postal service gets worse and mail starts arriving late, probably not though, it's the tory ethos!!

 

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