700,000 join in the stampede for Royal Mail shares
MORE THAN 700,000 private investors have applied for shares in Royal Mail – in a rush that could leave many people empty-handed.
The controversial privatisation has been over-subscribed nearly seven times over, it was announced yesterday.
Business Secretary Vince Cable told MPs his ‘very rough estimate’ was that 700,000 private investors signed up for shares before the midnight deadline on Tuesday. The total number is expected to rise even higher, possibly to 750,000, as some postal applications have not yet been included in the figure.
Dr Tim May, chief executive of the Wealth Management Association which represents small shareholders, said: ‘It is clear that small investors should be the backbone of Royal Mail plc. Governments have been elected on smaller majorities than 700,000.
‘These investors will demand and expect fair play when the final allocation is made.’
Ian Gorham, chief executive of Hargreaves Lansdown, one of the authorised brokers, said the demand for shares highlights the ‘real appetite for private share ownership and investing’ in Britain.
And Tom Stevenson, from investment giant Fidelity, said: ‘ It has been many years since investors have been so excited about an IPO [a flotation, also known as an initial public offering].’
On Monday Business Minister Michael Fallon said he was ‘committed to making sure small investors get their fair share’.
But he confirmed that around 70 per cent of the Government’s shares will be reserved for big investors such as hedge funds, leaving only ‘around 30 per cent’ for small private investors.
It is still not clear how shares will
‘Investors will demand fair play’
be divided between members of the public who sign up to the flotation.
Earlier this week, Chris Stevenson, vice-president of Barclays Stockbrokers, another authorised broker, said the ‘vast majority’ had asked for more than the minimum of £750.
One option is for everybody to be given £750 of shares. People who applied for more than this might be given a percentage of the extra amount. For example, if they applied for £10,000 of shares, they also could get 20 per cent of £9,250.
Given the political sensitivity of the privatisation, the final decision might end up being made by the Prime Minister, sources said last night.
Meanwhile, Royal Mail’s executives and other staff will get priority over members of the public, under the ‘employee priority offer’.
Chief executive Moya Greene and ten other directors have applied for a total of £500,000 of shares, according to the company’s prospectus.
Under the deal, they will pay the same price as other retail investors – between £2.60 and £3.30 per share – but will ‘receive priority on up to the first £10,000 of shares applied for’.
Yesterday Mr Cable warned the Canadian boss, who currently earns £1.5million a year, that she will have to show ‘appropriate restraint’ over her pay package after the Stateowned giant is privatised.
Speaking to MPs on the Business Committee, he urged Miss Greene and her fellow directors to resist the temptation of rapidly escalating their pay – or face the Government trying to block their pay packages as a minority shareholder.
He also rejected accusations that shares are being sold cheaply, insisting that the price range was ‘entirely sensible and robust’. He said the decision had been made after extensive consultation with the City.
Adrian Bailey, chairman of the Business, Innovation and Skills Committee, then confronted him over the type of institutional investor who will be allowed to buy shares.
He read out one of Mr Cable’s previous quotes, which said: ‘ Why should good companies be destroyed by short-term investors looking for a speculative killing while their accomplices in the City make fat fees?’
But Mr Cable insisted attempts are being made to freeze such ‘spivs and speculators’ out of the flotation, and focus instead on ‘responsible, longterm institutional investors’.