Royal Mail shares surge as formal trading begins

October 15, 2013
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A Royal Mail post box stands on a street in London on July 10, 2013/AFP
A Royal Mail post box stands on a street in London on July 10, 2013/AFP

, LONDON, October – Shares in British postal operator Royal Mail rallied further on Tuesday when formal trading of the stock began following a controversial part privatisation.

Royal Mail shares jumped as high as 490 pence in morning deals on the first day of trading for many of the 690,000 small investors who bought stock last week.

That increased the value of Royal Mail to as much as £4.9 billion ($7.8 billion, 5.8 billion euros), following part privatisation of the group by Britain’s Conservative Liberal Democrat coalition government.

That marked a vast gain of almost 50 percent from the offer price of 330 pence, which was set by the government last week and gave Royal Mail a far lower valuation of £3.3 billion.

Small investors who bought about £750 of Royal Mail shares are now sitting on a paper profit of more than £360 each.

Shares had already surged on Friday, and on Monday, as conditional deals began by institutional investors on the London Stock Exchange.

Britain’s privatisation of a 52.2 percent stake in the Royal Mail has sparked outcry from trade unions.

On Wednesday, the Communication Workers Union (CWU) will reveal the outcome of a strike ballot by postal workers over pay and working conditions.

One third of the government’s stake was allocated to retail investors, 10 percent was given to staff in the form of free shares, with the remainder sold to institutional investors such as pension funds, insurers and hedge funds.

The privatisation forms part of the coalition’s broader strategy to slash Britain’s budget deficit. Unions argue that customers will now receive a worse service.

The government has long argued that partial privatisation will allow Royal Mail the freedom to raise capital, continue modernising and meet booming demand for online shopping that generates parcel traffic.

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