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Royal Mail sale: Small investors will be favoured Royal Mail sale: Small investors will be favoured
(about 1 hour later)
Small investors will be favoured in the privatisation of the Royal Mail at the expense of those that want a large numbers of shares, the BBC has learned. Small investors will be favoured in the privatisation of the Royal Mail, but those seeking a large stake might not get any shares, the BBC has learned.
Anyone who subscribed for the minimum entitlement of £750 will receive 100% of their application, according to BBC Business Editor Robert Peston. Anyone who subscribed for the minimum entitlement of £750 will receive 100% of their application, according to BBC business editor Robert Peston.
But investors who applied for more than £10,000 worth of shares will get none, he said. But the government will set an upper level where investors will not receive any shares at all, he said.
Royal Mail's shares will be priced at 330p, valuing Royal Mail at £3.3bn. That level could be set at £10,000 worth of shares.
The price is at the top end of what the government was hoping for, after applications massively outstripped the number of shares on offer, BBC business editor Robert Peston reported. Coalition disagreement
The government will sell 52.2% of the company, the maximum it was prepared to sell at this stage, our editor added. The government will make a decision on the so-called zero allocation on Thursday.
That puts the value for the Treasury of the privatisation at £1.7bn. According to our business editor, there is some disagreement within the coalition about how to allocate the shares, with Business Secretary Vince Cable favouring a cut off at £10,000.
When it comes to allotting available shares, small investors will be favoured. Robert Peston said: "A government source said to me that ministers wanted to reward the Mrs Migginses, but not the big professional investors."
Robert Peston said: "A government source said to me that ministers wanted to reward the Mrs Migginses but not the big professional investors." Royal Mail's shares will be priced at 330p, at the top end of what the government was hoping for and values the entire Royal Mail at £3.3bn.
He also said that individual investors could be allotted as much as 33% of the total shares on offer, up from the original amount of 30%, while professional investors can expect their share to be reduced slightly to 67%.
Strong demandStrong demand
There were more than 700,000 applications for shares from retail investors, which far outstripped the value of shares on offer.
The applications indicate that individual investors had about £4bn to spend on Royal Mail shares, which is much more than the £517m worth of shares on offer.
Applications for shares from professional investors were also far beyond the amount allocated to them.
Our business editor says that combined, individual and professional investors may have had $15bn available to invest.
He also said that individual investors could be allotted as much as 33% of the total shares on offer, up from the original amount of 30%, while professional investors can expect their share to be reduced slightly to 67%.
The government will sell 52.2% of the company, the maximum it was prepared to sell at this stage, he adds.
That puts the value for the Treasury of the privatisation at £1.7bn.
Full trading in Royal Mail shares begins next Tuesday on the London Stock Exchange.
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 upwards on Friday last week.
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.
Royal Mail said the fundraising would provide it with the money needed to modernise and compete in a competitive parcels market.Royal Mail said the fundraising would provide it with the money needed to modernise and compete in a competitive parcels market.
Shadow business secretary Chuka Umunna criticised the government on Monday for "short changing" taxpayers. Shadow business secretary Chuka Umunna criticised the government on Monday for "short-changing" taxpayers.
But Business Secretary Vince Cable said Labour's criticism was "irresponsible" as it could imply an "easy bargain" could be had. But Business Secretary Vince Cable said Labour's criticism was "irresponsible", as it could imply that an "easy bargain" could be had.