Read the original article in the Daily Telegraph here.
Royal Mail shares soared 38pc to 455p in a first day of frenzied trading that saw rows over whether the Government had sold the business too cheaply or allocated too much stock to overseas funds.
The rise from the 330p offer price was one of the biggest first day jumps in the history of UK privatisations and, as investors rushed to cash in, stockbrokers’ systems went into meltdown.
Of the 1bn shares in issue, around 230m changed hands. The stampede started the moment the market opened at 8am, with the first trades going through at 450p – and initial bids as high as 458p.
Ian Gorham, chief executive of stockbroker Hargreaves Lansdown, which saw its systems buckle under the strain, said: “The volumes involved have gone off any conventional scale.”
The opening day saw only conditional dealings – trades between institutions – ahead of Tuesday’s official start of trading. But stockbrokers said much of the trading was from retail investors acting through intermediaries or hedge funds.
There was a ration of six sellers to every buyer – as institutions hoovered up the stakes of small investors.
Hedge funds and other short-term investors had been allowed a tenth of the 67pc of the offer reserved for institutions, to bring liquidity – though 500 of the 800 institutions that applied got turned away, having been deemed too short-termist.
By the end of the day, retail investors with £750 of shares were sitting on a paper profit of £285 – a windfall that heaped further pressure on the Government from all sides of the political spectrum.
Ben Harris-Quinney, chairman of conservative think tank, the Bow Group, said: “It should now be clear to even the staunchest supporters of the government’s flotation of Royal Mail that the company has been significantly undervalued.”
Business Secretary Vince Cable denied that, dismissing the initial jump in the shares that left the company capitalised at £4.45bn as “froth and speculation” that typically accompanies a large IPO.
“What matters is where the price eventually settles in three or six months’ time,” he said.
There was debate in the City too over the prominence of sovereign wealth funds on the share register, with one fund manager suggesting they may have been given “preferential treatment, so they’ll invest in HS2”, the £50bn fast rail link.
While Singapore’s GIC and the Kuwait Investment Office received relatively large allocations, no investor currently holds more than 2pc, with the average among the top 10 said to be 1.7pc.
Pension funds Threadneedle, Fidelity, Blackrock and Standard Life were also among the larger Royal Mail shareholders.