The Initial Public Offering of the Royal Mail has been dubbed the largest floatation in almost two decades and it is comparable to the sale of the railways in ’96. Over half the entity is being sold, approximately 52% while the government hold on to 38%. The employees of the Royal Mail are entitled to a total of 10% of the shares.
Many are rushing to buy shares as quickly as possible as it has been said that the sale frenzy is leaving many empty handed.
Of the 52% being sold, 70% will go to City banks and hedge funds and the remaining 30% to other, smaller, investors.
Sales will close tonight at 12:00 AM, midnight and the lowest amount available for purchase is £750 and this investment will is predicted to yield up to £300 within the first day of trading.
The selling price of the shares are between £2.60 and £3.30, these shares are expected to soar within the first day of trade up to £4.50 which will result in an initial profit of over 35%.
This has resulted in the government coming under heavy criticism for seriously undervaluing the company.
Claims have been made that the government is looking to sell one of the nation’s most prized assets in order to make a quick profit.
Analysts have suggested that the Royal Mail is worryingly undervalued and is looking at a loss of up to £1 billion. This, they say, is unfair to all the taxpayers of the nation.
The valuation was done with the assistance of financial service companies, Goldman Sachs and UBS.
Alan Johnson, who is a former secretary, said, “There is a vast difference between pricing Royal Mail shares conservatively and undervaluing them by £1 billion. This is ripping off the taxpayer on an epic scale.”
Others such as Chuka Umunna, current shadow business secretary, shares his sentiments.
Although many are rushing to buy shares of the Royal Mail, there are some risks associated with the investment.
Currently the biggest concern is strikes by the company’s employees planned for the 23rd of October. Majority of the staff are not happy with the IPO and plan to strike brushing aside the £300 offered by CEO Moya Greene attempting to pacify the company’s workforce. However representatives of the Communication Workers’ Union have called this a “bribe” and said that it “won’t fool postal workers”.
The greatest concern is that these strikes are likely to affect the price of the shares.