Stamp of approval from public on Royal Mail shares

The service that earlier Conservative governments refused to privatise, with Margaret Thatcher famously vowing not to privatise the Queen’s head, is now in the ownership of shareholders. Royal Mail, one of the most British of institutions, is the property of private investors for the first time in its 500-year history. 

The controversy surrounding the privatisation has not waned now that the shares have actually been issued – raising £1.72b for the UK economy – as questions arise as to whether the company as a whole and, as a consequence, the shares were undervalued. 

The increase in value of shares in a brief overnight period fuelled arguments that the shares were underpriced in the first place – a theory backed up by the vast number of applicants for the shares before they were placed on the market. 

The number of small investors appears to have taken everyone by surprise, and the government was forced to reduce the number available to large institutions in order to accommodate the demand from members of the public who applied. It is estimated that 95% of the public who applied for shares have received them. 

The shares were initially priced at £3.30 each and the Business Secretary, Vince Cable, defended the pricing of them: “We have struck the right balance, increasing the proportion of shares going to small investors to ensure they get their fair share and ensuring the employees get a 10% stake in the business.”

The total value of the Royal Mail was put at £3.3 billion, and there has been an argument put forward throughout the negotiations that the taxpayer should not be paying for something it already owns. However, the coalition government believes that the sale will encourage competition in the area of parcel delivery – perhaps not a moment too soon for those who regularly send parcels through the service and whose pockets are being hit by Royal Mail’s new pricing structure. 

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