The 700,000 private investors who subscribed en masse for Royal Mail shares look set to getpriority over wealthy financial investors after the UK government defended the IPO price range and
its handling of the share offer.The shares are now almost certain to be priced at 330 pence each, the top of the price range,valuing the company at £3.3 billion. Assuming the over-allotment option is exercised, 60% of RoyalMail shares will be sold, generating up to £2 billion for the government.
Business Secretary Vince Cable told a Parliamentary committee yesterday that about 700,000private investors had placed orders for Royal Mail shares, making the offer about seven timesover-subscribed. He said the minimum order level of £750 was designed to ensure that “ordinarypeople” could buy shares in the company and defended the price range as “good value for money forthe taxpayer”.
Cable emphasised that small investors should be given priority in the share allocation to ensurea wide spread of ownership. Under the terms of the float, City institutions were guaranteed toreceive 70% of the share issue and small investors 30%. However, this proportion might now bechanged slightly towards small investors.
At the same time, there could be an upper cut-off level, meaning that small investors wouldreceive all or most of their share order but larger investors who ordered more than a certain levelof shares might go empty-handed or have their orders scaled back heavily.
The share allocation is due to be officially announced late on Thursday or early on Friday. Oncethe official share price has been announced, conditional trading by institutional traders is due tostart on the London Stock Exchange on Friday (October 11). The share will be fully listed for opentrading next Tuesday (October 15).
A further 10% of shares were given to Royal Mail employees for free and virtually all 150,000entitled staff took up the offer.
