iNVEZZ.com Tuesday, October 15th: Shares in Royal Mail (LON:RMG) yesterday hit a new high on their second day of conditional trading, as investors continued to buy into the postal service firm ahead of its full stock market debut today.
Royal Mail’s shares were priced at 330p by the Government on Thursday night and surged by more than a third to 455p on Friday - sparking a selling frenzy among small investors looking for a quick profit. Despite postal workers union’s strike threat (Royal Mail share price surges ahead of full stock market debut), demand remained rampant yesterday, with about 16 million shares traded. As investors continued to buy into the postal service, the stock price yesterday added a further 20p to close at 475p -- a 4.4 percent gain on the day and 44 percent higher than the price at which conditional trading opened.
Around 350,000 shareholders who bought their stakes through a government website – out of a total of 690,000 retail investors – today receive their share certificates allowing them to cash in on the two-day stock performance. The 44-percent jump in the launch share price means that 227 shares bought from the government for £749.10 – the allocation for every retail investor – are now worth £1,078, or around £315 each.
Investors who have bought shares directly from the government will have to pay £17.50 to sell their shares online, while those who have bought through a broker could sell the shares for a fee as low as £12. Until now, the shares could only be bought and sold via stockbrokers.
Royal Mail will be fully listed on the London Stock Exchange at 08:00 BST today, triggering unconditional dealing and allowing anyone to buy and sell. Analysts and stockbrokers expect today’s trading activity to be as high as Friday, when more than 100 million shares were traded in the first hour.
Cable under pressure
The surge in Royal Mail’s share price means that the postal service is now valued at around £4.8 billion, £1.5 billion above the level implied by the initial public offering price. That has fuelled further accusations that the government, which is selling up to 60 percent of Royal Mail in Britain’s biggest privatisation since the sale of the railways in the 1990s, sold off the 497-year-old company too cheaply. The postal service’s flotation was described by Labour leader Ed Miliband as a "fire sale of a great institution at a knock-down price".
As reported by The Times today, MPs are set to escalate their investigation into the price at which the government sold the Royal Mail. An inquiry by the House of Commons Business Select Committee could be widened to interrogate Lazard, the government’s adviser, as to how the 330p-a-share sale price was settled upon. It has also emerged that the National Audit Office has begun preliminary work ahead of what will be the launch of an official inquiry into the sale of Royal Mail and the role of Business Secretary Vince Cable.
Adrian Bailey, the Labour chair of the Commons Business Select Committee, has said the early evidence of the share price "vindicated" concerns raised when it quizzed Cable last week. He has added he would seek fresh hearings about the sell-off if the market price remained so high, but he needs the agreement of the committee, which is due to meet later today.
The Royal Mail share price this morning opened almost 0.8 percent higher at 478.00p.
As of 08:03 BST buy Royal Mail shares at 477.50p.
As of 08:03 BST sell Royal Mail shares at 477.00p.