By Richard Johnstone | 11 October 2013
Shares in Royal Mail have jumped in value at the start of trading today, after the government announced the price and allocation of equity in the privatisation that will raise nearly £2bn for the Treasury.
Business Secretary Vince Cable announced bidders would be charged 330p a share, the highest possible price the government could put on the purchases under the terms of the initial public offering.
Ahead of the firm being formally listed on the London Stock Exchange on Tuesday, some conditional trades between big financial institutions today have seen shares rise in value to 444p.
Based on the offer price, the total market capitalisation of Royal Mail at the start of conditional dealings was £3.3bn. The Treasury will receive between £1.7bn and £2bn from the sale, dependent on whether some additional share rights, known as the ‘over-allotment option’, are taken up. If these additional shares are sold, the government will retain a 30% share in the company once the sales are complete.
Cable announced yesterday that all members of the public who applied for shares in Royal Mail worth up to £10,000 would receive an allocation of 227 shares, worth £749.10 at the offer price.
This represents almost 95% of all members of the public who have applied, and all those who submitted a valid application for £750 worth of shares – more than 93,000 people – will have their application met. Those who applied for shares worth more than £10,000 will not receive an allocation, which Cable said was in line with how large applications had been treated in other over-subscribed privatisations.
The government’s priority was to get value for the taxpayer and create a stable long-term ownership structure to enable the firm to raise commercial funding to invest, he said.
‘This listing achieves all of these objectives. We have struck the right balance, increasing the proportion of shares going to small investors to ensure they get their fair share and ensuring the employees get a 10% stake in the business.’
Royal Mail chief executive Moya Greene said it was ‘gratifying’ that the firm had the support of so many investors, including pension funds.
