Other people's business

RSS

Five questions answered on Royal Mail’s share price rise

They rose more then 38 per cent.

New Statesman
Photograph: Getty Images

As Royal Mail shares started conditional dealings on the London Stock Exchange this morning the demand was so high the share price rose substantially. We answer five questions on the latest news about Royal Mail’s stock exchange debut.

By how much has Royal Mail’s shares risen by?

They rose more then 38 per cent to 456p at the start of conditional dealings on the London Stock Exchange.

The oversubscribed sale price was at 330p per share with a total value for the business of £3.3bn, however, after trading began its value shot up by £1.1bn. 

Did the shares stay at this price?

No, by midday they had fallen to 435p.

The shares are listed officially next Tuesday, but City institutions began conditional dealings on Friday.

Does this initial spike mean the company has been undervalued?

Business Secretary Vince Cable has insisted the tax payer is getting a good deal with the sale price of Royal Mail. However, some have called it a "sham".

Communication Workers Union, Billy Hayes, speaking to BBC Radio 4's Today, described the sell-off as "a tragedy".

He added: "This is a sham, really. The company has been undervalued.

"It's basically David Cameron rewarding his mates in the City. Vince Cable, one of the cleverest men in British politics, has made one of the stupidest decisions he is ever likely to make as a politician."

What else has Cable said?

Also speaking on today’s BBC Radio 4's Today: “You get an enormous amount of froth and speculation in the aftermath of a big IPO [initial public offering] of this kind.

"The bulk of the shares have gone to long-term institutional investors, stable investors, some overseas investors, but mainly British pension funds and insurance companies who are there for the long term.

"The objective of the exercise, which fits in with what we want for the Royal Mail, is to make sure it has stable, long-term investors."

Anything else?

The demand has caused endless trouble for broker Hargreaves Lansdown whose system has buckled under the heavy demand to trade Royal Mail shares.

Ian Gorham, the company’s chief executive, issued a statement saying:

“Whilst clearly we predicted and prepared for substantial activity in Royal Mail shares, the volumes involved have gone off any conventional scale.

“We have six times the normal number of dealing staff working today, and continue to work hard to deal with the demand. We will keep working flat out until our normal fluent service is restored. We’d like to apologise to our clients for any issues they have experienced this morning.”