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Royal Mail shares 'seven times over-subscribed' | Royal Mail shares 'seven times over-subscribed' |
(about 2 hours later) | |
The Royal Mail share-offering for private investors was seven times over-subscribed, with 700,000 applications in total, according to the Business Secretary Vince Cable. | The Royal Mail share-offering for private investors was seven times over-subscribed, with 700,000 applications in total, according to the Business Secretary Vince Cable. |
Speaking to a committee in parliament, he said he was "confident" the shares were "priced in the right place". | Speaking to a committee in parliament, he said he was "confident" the shares were "priced in the right place". |
Shares will begin full trading on Friday, priced between 300p and 330p. | Shares will begin full trading on Friday, priced between 300p and 330p. |
Mr Cable's comments come after criticism from Labour that the shares were being sold too cheaply. | Mr Cable's comments come after criticism from Labour that the shares were being sold too cheaply. |
Strong demand | Strong demand |
The deadline for the general public to buy shares was on Tuesday. | The deadline for the general public to buy shares was on Tuesday. |
Shares were initially priced between 260p and 330p, but strong demand led the government to revise the figures up on Friday last week. | Shares were initially priced between 260p and 330p, but strong demand led the government to revise the figures up on Friday last week. |
Private investors were offered 30% of the shares, with the rest being sold to institutional investors such as pension funds and insurance companies. | |
The offering for institutional investors was also heavily over-subscribed, he said. | |
Under the terms of the share sale, a 10% stake in the business has been reserved for Royal Mail employees. | Under the terms of the share sale, a 10% stake in the business has been reserved for Royal Mail employees. |
The sale is expected to value the firm at £3.3bn, at the top of the target range. It will be one of the largest in Britain since the privatisation of the railways by John Major's Conservative government in the 1990s. | |
The floatation compares to BT shares sold by the government in 1984, which were 3.2 times oversubscribed with 96% of its employees becoming stakeholders. | |
Royal Mail said the fundraising would provide it with the money needed to modernise and compete in a competitive parcels market. | |
Mr Cable was asked by MPs how he would protect the company from retail investors selling quickly for short-term profit. | Mr Cable was asked by MPs how he would protect the company from retail investors selling quickly for short-term profit. |
He said: "Obviously we can't account for how the retail investors use the shares when they have acquired them." | He said: "Obviously we can't account for how the retail investors use the shares when they have acquired them." |
He said the government was "committed to protecting that particular group", adding smaller private investors were probably not looking to "make a killing". | |
He added that he was "absolutely confident" that shares would be placed with long-term investors, as the government was not just looking for the highest bid, which could encourage short-term investors such as hedge funds. | |
Shadow business secretary Chuka Umunna criticised Mr Cable on Monday for "short changing" taxpayers. | |
But Mr Cable said Labour's criticism was "irresponsible" as it could imply an "easy bargain" could be had. | |
Mr Umunna also said the £750 minimum application was too high. | |
Danny Cox, head of financial planning at Hargreaves Lansdown, said recent political wrangling over the share price would not make much difference who decides to sell or not. | |
"People will decide to buy or hold the shares based on their own views about how the price would change in the first few days," he said. |