Small investor frenzy is a Royal Mail sell-off headache
Press reports suggest that the Royal Mail sell-off, which closed at midnight on Tuesday, has been massively over-subscribed by institutional investors and smalltime share-buyers alike. This is apparently causing a headache for the government. Not least because the share offer has been 15x over-subscribed in total, according to reports.
It was originally planned that the share offer would be split 70/30 between big investment organisations and individual share buyers. However, small investors, who could spend upwards of £750 on the offer have signed up in much greater numbers than expected. Apparently, seven times more small investors have subscribed to the share offer than forecast.
Quite simply. Demand has greatly outstripped demand. I can’t think of any more obvious free market evidence that the Royal Mail share offer has been underpriced than this.
Aspiring investors will learn on Friday whether they have been successful in their share bid and how many shares they will receive and for how much. But it’s expected that smaller investors will be prioritised over bigger, city investment bodies.
Vince Cable, the Business Secretary, and Michael Fallon, the minister in charge of the sell-off, met on Wednesday night to discuss the problem. Cable said during the day that 700k big investors had applied in time. City pundits claim that small investors have bid for £3.5 billion of shares. Under the original plans, only roughly £500 million of stock is available to such investors.
The Prime Minister David Cameron and Nick Clegg, who is reportedly the Deputy Prime Minister, will make the final call on Thursday as to how the shares will be divvied up. We’ll see what happens.
,”Quite simply. Demand has greatly outstripped demand. I can’t think of any more obvious free market evidence that the Royal Mail share offer has been underpriced than this.”
ior that the sale was wanted ,accepted ,and supported ! by the general public
‘Small investor frenzy is a Royal Mail sell-off headache’
Not so much of a headache as if the offer had been undersubscribed!
All just part of the mini ‘thatcherite’ boom pre the next election.
Of course it’s underpriced. It has to be as if sold for what it’s worth how would they immediately raise more money as is their stated aim?
Lenders don’t lend without pretty good collateral or at least a reasonable expectation of profits for investors and if it’s sold for what it’s worth there would be no profit left!! Duh!
Normally that’s not an issue as flotation generates cash for the business to invest, but in the case Royal Mail doesn’t get their hands on the cash – the government gets it leaving Royal Mail no better off than they are today….. unless it’s underpriced.
Thank you so much for privatisation
Raped and pillaged yet again.
our heritage! belongs to the public ,political posturing etc etc, yet most here will use alternative mail companies ,even this blog itself accepts revenue from royal mails competition , yet moralises on the justice and ethics of it all, Get real were in a market economy ,money talks
We have no problem with Royal Mail being privatised if it would solve any of the problems Royal Mail faces… But it doesn’t.
That’s our issue – Royal Mail is no better off after flotation than before, in fact all we can see is price rises for parcels and a gradual nibbling away at the universal service (which will continue to happen and already has been going on for years – where’s my first and second post delivery per day for starters?)
These are exsisting complaints your insinuating privatisation is already to blame lol
if those that fly the flag for A state run Royal mail
had stuck to their principles rather than their pocket, had only used royal mail services maybe royal mail would be in a better postion
Two deliveries per day?
We often get nothing in the first delivery so where would be the sense of 2?
It’s not as if we are waiting for all those ‘cheques in the post’ these days.
The Queen has stated in the Royal Charter linked to the privatisation that Royal Mail has to offer a universal service to use the title “Royal”. Do you believe that Royal Mail would wish to loose their Royal Charter and this status?
We all agree Royal Mail requires modernisation and new technology. The company will now be able to raise capital privately to enable this. Up until now this has not been possible.
Call me what you will, but I disagree with the sell-off, however, that does not mean I cannot profit (hopefully) from it. I believe the decision to sell-of is wrong for all the reasons already mentioned, however, I would be mad not to try and profit from the flawed and short-sighted decision-making of this Government. There will be many out just to profit (like me)from this sell-off, as the large institutions (especially the likes of TNT)have their big allocations cut down and then try to buy-up the quota they originally wanted at the market price.
I would like to see how Ebay are going to get people to purchase when it will be cheaper to purchase in a shop.
Expect your DSR’s to get dinged on P+P.!!!
Only the big boys to gain!!!.The small seller selling an item at 99p with 3.50 p+p for a pencil set.Yea Right!!!!!!!!!
So much for the internet revolution!!!
dont worry alex salmond has commited himself to re nationalise the mail in scotland , if they win independance ,you can then pay more taxes than postage
No left wing bias in this story then Dan.
I wonder how many brown envelopes were handed over to push this privatisation through and to peg the price so low?
Definitely underpriced, absurd to say otherwise. If I sold my house and a week later the new owner put it up for sale for 35%+ more I’d be kicking myself (and furious with the Estate Agents who valued it).
If I sold my house I would be ecstatic
Many years ago I can remember seeing an interview with Sir James Goldsmith. He explained how he had made a fortune on the Stock Exchange when there was a “Crash”. He recognised that it was coming so he sold up everything. He waited until after the crash and then bought back all of the shares he had so recently sold, plus a lot more, for a much lower price. These things can happen on the Stock Exchange.
However the Government was selling off the Royal Mail. It paid highly qualified advisers to value the business and the shares to try to ensure that the asking price was correct. The way that these share issues are priced is that there is a small undervaluation built into the price. This is so the shares will rise slightly after the issue. After all if the shares are over priced nobody will buy them.
It is a fine line but that is why the advisers who are Merchant Banks etc are paid £millions for their advice. But the leap in price on the early trading was probably a great deal more than should have been expected.
Over the next few days, weeks, months the share price will settle down. If it is about 5% or 10% over the issue price this is about what should have been expected. If 30% or more then it is obvious that the Share Issue Price was well under valued and there should be an investigation and heads should roll.
Where and how can I buy shares ?
Your Bank may be able to help. Otherwise it could be a Stock Broker. Although if you are investing in a Pension Scheme or have other savings then it is likely that you are already a Share-holder. But you cannot buy them now as you could only a few days ago because the offer was only for a specified number of days. Even those who applied for shares at that time did not all get what they applied for and many received none at all.