Royal Mail Privatisation Draws Investor Rush For 'Absolute Bargain' Shares

Investors Rush To Get 'Absolute Bargain' Royal Mail Shares
A Royal Mail Group Ltd. employee carries a mail sack towards a postal truck in London, U.K., on Friday, Sept. 13, 2013. Royal Mail Group Ltd., the U.K.'s 360-year-old postal service, intends to hold an initial public offering of a majority stake 'in the coming weeks' to help the company gain a competitive edge against European rivals. Photographer: Simon Dawson/Bloomberg via Getty Images
A Royal Mail Group Ltd. employee carries a mail sack towards a postal truck in London, U.K., on Friday, Sept. 13, 2013. Royal Mail Group Ltd., the U.K.'s 360-year-old postal service, intends to hold an initial public offering of a majority stake 'in the coming weeks' to help the company gain a competitive edge against European rivals. Photographer: Simon Dawson/Bloomberg via Getty Images
Getty

Investors have been rushing to get "cheap" Royal Mail shares before its stock market flotation in such numbers that City analysts expect the business' privatisation will be an "unqualified success".

Individuals have until midnight this Tuesday to apply for shares, with Royal Mail set to debut on on the stock market on Friday.

Royal Mail is entering onto the stock market at an estimated £3.3 billion evaluation, with shares priced at between £2.60p and £3.30p.

David Buik, from City analysts Panmure Gordon, told the Huffington Post UK that the demand could be ten times as much as the amount of shares available.

"It looks like it's going to be an unqualified success. It has been underpriced but it hasn't been done wantonly," he said.

"You have to make it attractive to an investor to plough in, if you want them to plough in, you have to make it an absolute bargain."

Ministers are selling up to 62% of the business, with 10% going for free to Royal Mail staff.

Michael Jarman, head of equity strategy at H20 Markets, told HuffPostUK: "The government haven't been greedy at all with this one. The offering is oversubscribed and the stock is well placed to outperform the market into year end."

Labour shadow business secretary Chuka Umunna has accused the government of "short-changing the taxpayer" and called for the flotation to be delayed.

Stockbrokers are expecting applications to come in until the last minute of the deadline, midnight on Tuesday, with people set to find out how many shares they got on Friday.

Other analysts say the Royal Mail valuation is "cheap" but warn the share price isn't guaranteed to soar.

Peter Leahy of the City training firm Sovereign Leadership Group told HuffPostUK: "Is it cheap? As far as I'm concerned, it'll get cheaper."

Nick Hungerford, CEO and founder of Nutmeg, said: "Prices can double or halve in short order. Investors need to consider a purchase of Royal Mail shares in the context of their overall portfolio. What seems cheap now can easily get cheaper."

Close

What's Hot