36,500 get nothing in £37bn rush for Royal Mail shares
THE majority of small investors who took part in the stampede for shares in Royal Mail will get less than half of the stock they wanted – with 36,500 people getting nothing.
More than £37billion, including £4billion from ordinary savers, was offered, but they were chasing just £1.7billion of shares which were available to buy.
Yesterday the Prime Minister hailed today’s flotation of the Stateowned giant as ‘ a piece of popular capitalism’, with an extraordinary 730,000 people signing up to buy shares. But in a move slammed as ‘unwise and unfair’, anybody who applied for more than £ 10,000 of shares will get nothing.
Vince Cable, the Business Secretary, said the decision to freeze out wealthier investors ‘struck the right balance’.
Everybody who applied for £10,000 or less of shares will get the same amount – 227 shares equal to £749.10. The minimum they could apply for was £750.
A No 10 source said: ‘If you are investing £100,000 or even £20,000 in shares, then there is frankly an argument that being presented with £750 of shares would be little more than an annoyance.’
Of the 730,000 small investors who wanted to buy shares, a minority – 93,000 – had actually wanted only £750 worth.
Last night, official figures from the Department for Business showed around two-thirds of people received less than half of the shares they had applied for.
To add to their frustration, unsuccessful small shareholders have to wait until as late as October 21 to get their money back, according to the detail buried in the 447-page report.
In a controversial move, they
‘The pricing has been wrong’
will not receive a single penny in interest on their money, but the Government will scoop interest on the enormous cash pile. Private investors had the money immediately removed from their debit card, or cheque cashed, for the full amount that they wanted to buy. As a result, they handed over around £4bil- lion, but will get just £568million of shares, leaving around £3.4billion of money earning interest until the deadline for the money to be refunded.
This could trigger a windfall of around £2million, according to calculations by the financial website Moneycomms.
City institutions were also turned down in massive numbers. Of the 800 institutions who wanted to buy shares in Royal Mail, 500 were turned away, a process knowing as ‘zeroing’.
Sources reveal ‘ a small number’ of hedge funds were allowed to buy shares, although Mr Cable insisted earlier in the week that only ‘responsible, long-term institutional investors’ would be permitted.
The scale of the interest in Royal Mail fuels fears that the privatisation was chronically under-valued. Lord Forsyth, former Conservative cabinet minister, said: ‘Clearly the pricing has been wrong.
‘Clearly they could have been more optimistic about the appetite of small investors.’
The shares, which will begin conditional trading on the stock market today, were given a price range of between £2.60 and £3.30. Yesterday they were priced at the top end of the range at £3.30 each, amid widespread speculation that they could reach £4 or more today.
Dr Tim May, chief executive of the Wealth Management Association, which campaigns for small shareholders, said: ‘Even if it is legal, it seems unwise and unfair.’ The Government – which used to be Royal Mail’s only shareholder – will retain a stake of nearly 38 per cent in the business.