Royal Mail shares quickly surged more than 35% on their official IPO price of 330 pence on theirfirst day of trading on the London Stock Exchange today, prompting renewed criticism that the
government had underpriced the historic privatisation which was seven times over-subscribed.As expected, the UK government fixed the opening share price for the 52.2% of company sharesbeing sold at 330 pence, which was the upper limit of the share offer and which valued the companyat £3.3 billion.
But traders flocked to buy shares when conditional trading opened this morning, sending sharesup to 456 pence. This raised the company valuation to about £4.5 billion. The share price haddropped back to 437.75 pence by late afternoon.
The government allocated 33% of the share sale to private investors and 67% to institutionalinvestors, giving the 690,000 private investors slightly more than the originally planned 30-70investor split in response to the unexpectedly heavy demand. It also only allocated shares toprivate investors who invested less than £10,000 on Royal Mail shares.
Business Secretary Vince Cable today again defended the government’s pricing and allocation ofRoyal Mail shares. “What matters is where the price eventually settles and if we look back on thisin three months, six months time, or indeed years to come, that’s what we’re really interested in,”he told the BBC.
The sale of 52% of Royal Mail shares has so far raised £1.7 billion for the government but thiscould rise to £2 billion if the over-allotment option is exercised, taking the share flotation to60%.
A further 10% of Royal Mail shares have been given free to some 150,000 employees. The Britishgovernment is thus likely to retain a 30% holding in the company.
