Small investor frenzy is a Royal Mail sell-off headache

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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.

20 Responses

  1. ,”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

  2. 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.

  3. 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.

  4. 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

  5. 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.

  6. 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!!!

  7. I wonder how many brown envelopes were handed over to push this privatisation through and to peg the price so low?

  8. 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).

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