Strong Royal Mail debut fuels price debate
LONDON: Shares in Britain's Royal Mail rocketed to a near 40 per cent premium above their issue price in its stock market debut yesterday, fuelling a debate about whether they had been priced too low in order to guarantee a successful privatisation.
The share price increase, which inflated the value of the near 500-year-old company to STG4.5 billion (RM22.8 billion) in one of Britain's biggest state sell-offs for decades, came after criticism from the opposition Labour party that the government was shortchanging taxpayers.
The stock hit an early high of 456 pence (RM24) after the hugely oversubscribed sale of a majority stake had been priced at 330 pence (RM17) per share, generating STG1.7 billion for the government before fees and a possible "overallotment" option of extra shares, which can be sold depending on demand.
Business Secretary Vince Cable again denied the government had undervalued Royal Mail, whose red mail boxes decorated with the Royal Crest are a feature of British landscapes from Land's End in southwest England to John o'Groats in Scotland.
"You get an enormous amount of froth and speculation in the aftermath of a big initial public offering of this kind, it's of absolutely no significance whatsoever," he told the BBC.
After receiving around STG27 billion worth of orders for the STG1.7 billion worth of shares on offer, the government allocated 33 per cent of the offering to members of the public, with the rest going to institutional investors. Reuters