Royal Mail Shares Soar In First Trades
Nearly 150,000 Royal Mail staff were sitting on shareholdings worth more than £3,000 after a first day of trading that left the Government exposed to accusations that it had vastly undervalued the company.
The postal operator's shares ended conditional trading on Friday up 38% on their sale price of £3.30, capping a session in which institutional investors engaged in a stampede aimed at bulking up their holdings.
The frenzied trading followed the vastly oversubscribed demand for shares which saw more than £40bn in orders received by advisers to the Government.
The closing price of 455p gave Royal Mail a market value of £4.55bn, meaning it would be guaranteed entry to the FTSE-100 index when its next quarterly review takes place before the end of the year.
Royal Mail employees now hold shares worth £455m after being handed 10% of the company by ministers keen to smooth the path to privatisation. However, they are unable to sell the stock without incurring a tax liability for five years.
At the closing price, each employee's shares were worth just over £3,033.
Royal Mail's eleven board directors also benefited from the surge in the share price. The collective owners of 33,557 shares, the directors were sitting on stock worth £152,685, a profit of more than £40,000 on the day.
Ordinary retail investors who received the basic allocation of £750-worth of shares were sitting on a paper profit of more than £270m, with many expected to try to sell their holdings when full trading gets underway next Tuesday.
Vince Cable, the Business Secretary, told Sky News that allegations that the Government had undervalued Royal Mail were "nonsense", but a continued upturn in the share price in the coming weeks would lead to uncomfortable questions about the advice given to ministers and the fees paid to the investment banks working on the privatisation.
Chuka Umunna, the shadow business secretary, said Royal Mail had been "significantly undervalued with taxpayers being left short changed. Vince Cable has shown how out of touch he is in dismissing the hundreds of millions of pounds which the taxpayer could have lost out as 'froth' at a time when families across Britain are facing a cost of living crisis."