Royal Mail’s share price rises despite looming strike action

iNVEZZ.com, Wednesday, October 30th: Royal Mail’s (LON:RMG) shares traded two percent higher in the morning despite the announcement that Post Office workers will join Royal Mail employees in a massive strike, which is expected to severely disrupt postal services across the UK next week.

The Guardian yesterday reported that up to 4,000 workers in hundreds of the UK’s main post offices will walk out on Monday over issues of pay, job cuts and branch closures. They will be joined by Royal Mail employees, who are seeking agreements from the newly privatised service in a separate dispute.

Dave Ward, deputy general secretary for the Communication Workers’ Union (CWU), told journalists,

Despite the looming strike action Royal Mail shares today have been trading at around 544.00p, or 40 percent above the IPO price, giving the company a market valuation of about ₤5.4 billion. Two weeks ago workers at the privatised Royal Mail voted to strike for 24 hours on November 4 if they couldn’t reach agreement with the firm on pay and working conditions.

CWU’s Ward said.

The CWU has also called for business secretary Vince Cable to stand down following revelations over Royal Mail’s privatisation. These include JP Morgan telling the government earlier this year that it believed the postal service could be worth up to ₤10 billion.

According to the Sky News coverage of the news, Citi and Deutsche Bank have also pitched valuations well above the flotation price. Citi had suggested an upper valuation of ₤7.3 billion, while Deutsche Bank had argued that Royal Mail could be worth between ₤6.4 billion and ₤6.9 billion. "A full inquiry should be launched into the mishandling of this unnecessary privatisation by Vince Cable,” commented Billy Hayes, the CWU general secretary.

Adding to the union’s and workers’ discontent was last week’s announcement that a UK hedge fund had become the biggest shareholder in Royal Mail after the British government. The Children’s Investment Fund has a 5.8 percent stake in the postal service and is considered an activist investor, which means it pressures management to take changes.

The Labour Party said TCI’s investment was yet another sign that the privatisation was benefitting “big money investors in the City” and not the taxpayer.

Ian Murray, Labour’s Shadow Minister for Trade and Investment, was quoted by the Financial Times as saying,

As of 12.33 UTC buy Royal Mail shares at 545.50p.
As of 12.33 UTC sell Royal Mail shares at 544.50p.