Hundreds of thousands of private investors enjoyed a bonanza today as Royal Mail shares rocketed 36 per cent above the offer price — giving them instant windfalls of £270 each.
Shares priced at £3.30 soared to almost £4.50 within minutes of trading opening at 8am. More than 10 million changed hands in the first 10 seconds and within an hour there had been 100 million transactions.
Amid the lucrative returns for investors, there were furious claims that ministers deliberately undervalued the 500-year-old postal service to ensure that the flotation looked a success. Labour estimated that taxpayers had lost out on £500 million.
Investors lucky enough to get their hands on shares made instant gains. Some 690,000 private investors were allocated 227 shares each, costing £750. By 10am, they were worth £1,020.
Some people attempted to invest fortunes. The Evening Standard learned that 17 people tried to invest £1 million each and 24 others attempted to invest even higher sums. However, anyone who bid for more than £10,000 of shares got nothing.
Applications worth £3.8 billion were made by members of the public — seven times more than the retail issue.
That means the Government will be earning interest on up to £3.2 billion of disappointed investors’ money, which will be refunded by October 21.
Today’s conditional trading was only between City institutions. Private investors who bought directly cannot cash in until next Tuesday when full trading begins.
In total, £37 billion of applications were made for shares — 20 times what was available — with pension funds favoured in the allocations.
Business Secretary Vince Cable denied that the sharp rise in share prices this morning proved that the company had been undervalued.
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“You get an enormous amount of froth and speculation in the aftermath of a big IPO of this kind,” he said. “It is of absolutely no significance whatsoever. What matters is where the price eventually settles.” He called the sell-off a “very good deal” for Royal Mail workers and for the company.
But shadow business secretary Chuka Umunna MP said: “Trading has only just begun, but there are indications that Royal Mail has been significantly undervalued with taxpayers being left short-changed.”
Around 150,000 Royal Mail staff were given free shares — making them windfalls of about £2,000 each. Some 150 staff refused to accept the offer in protest at the privatisation.
Billy Hayes, the leader of the Communication Workers Union, the postal workers’ union, said that staff would pocket the money and still vote for a strike in protest next week.
He called the flotation “a tragedy” and said: “This is a sham, really. The company has been undervalued. It’s basically David Cameron rewarding his mates in the City.”
But Joe Rundle, head of trading at ETX Capital, called the share issue a “dazzling stock market debut”.
