Royal Mail shares soar on first day amid controversy
Demonstrators dressed as robbers protest outside stock exchange in central London
Royal Mail’s initial public offering is significantly oversubscribed and many institutional investors that applied for stock will not get any allotment today. Photograph: Paul Thomas/Bloomberg
Royal Mail, Britain’s 360-year-old postal service, jumped 38 per cent on its trading debut this morning, heightening criticism of an initial public offering that opposition politicians say was underpriced.
Royal Mail shares, sold to investors for 330p (€3.90) in the UK’s biggest state asset sale since British Rail was broken up in the 1990s, rose 126 pence to 456 pence. The stock traded 35 per cent higher at 445 pence as of 9.41 am in London, giving a market value of £4.46 billion.
But the sale has been criticised by the opposition Labour party as under-pricing the firm and short-changing taxpayers.
The government faced continued protests over the controversial sale, amid warnings that postal services will get worse as a result of the sell-off.
Demonstrators dressed up as robbers outside the Stock Exchange in central London today to mark the first day of conditional trading in the shares.
They held up a banner which read “The Great Royal Mail Robbery”, and carried swag bags representing how private investors are being allowed to “steal” public assets.
Royal Mail’s public offering leaves the government with a 38 per cent stake, it said yesterday, but this could fall to 30 per cent should it choose to exercise an over-allotment option.
The government made 33 per cent of shares available to the public, more than the 30 per cent allocation that had been had expected, after the sale was oversubscribed seven times. That left institutional investors, whose offer tranche was over 20 times oversubscribed, with 67 per cent of the offering.
Business secretary Vince Cable yesterday denied claims that the firm had been sold off on the cheap.
“There’s no question of it being undervalued, we worked for a very long period of time to establish the true value for serious long-term investors,” he said, adding that he thought the government had struck the right balance by favouring small investors.
Royal Mail’s flotation, which has gone ahead despite the threat of strike action and criticism from Labour, follows three earlier attempts by different governments to privatise the business that has been in state hands for almost 500 years.
Those attempts over the last 19 years have failed due to opposition from within the governing majority, which feared an electoral backlash from tampering with a revered institution whose red post-boxes are known around the world.
The government’s allocation strategy for individual investors, who each had to spend a minimum of £750, favoured those who applied for less than £10,000 worth of shares. Those applying above that level did not receive any shares.
The government will also hand 10 per cent of Royal Mail’s shares to staff in the largest share giveaway of any major British privatisation.
Shares in Royal Mail began trading at 7am today.