Royal Mail shares soar above £5

 

Shares in Royal Mail have risen 50 per cent above the offer valuation a week ago to hit more than £5 as Business Secretary Vince Cable admitted he was told before the float that the price could soar.

The new high was reached as Mr Cable said bankers at Goldman Sachs, UBS and Lazards handling the sale persuaded ministers not to increase the offer price above 330p, fearing it could hit demand.

He said that earlier in the preparation for the sell-off during the summer, the threat of strikes by Royal Mail workers left some potential investors saying they were not willing to buy.

An initial price range of 260p to 330p was set, with the lower end factoring in possible escalating industrial relations problems that might push it down.

Mr Cable has dismissed the flotation fever , which saw the value of the company immediately soar by £1 billion when trading began last Friday, as "froth".

But shares climbed as high as 501.1p in today's session, valuing Royal Mail at £5 billion. The initial offer price of the company's shares at 330p had calculated it at £1.7 billion less.

Last week's surge saw the price climb steeply to 455p by the close, but the continuing rise showed that even at that value investors were keen.

Full trading in the shares, when members of the public who had bought them directly from the Government were able to cash in profits on the rise for the first time, began on Tuesday.

But the price continued to tick upwards as appetite remained unabated.

In a new letter to MP Adrian Bailey, chairman of the Commons Business committee, Mr Cable admitted that revising the price range upward was considered in a late stage of preparations for the sell-off "given the demand generated".

But he said this was not pursued based on assessment of the demand in the order book and where it would begin to taper off, "especially from informed potential long-term investors". Some of these expressed concern about an increase, he said.

Goldman Sachs and UBS, global co-ordinators (Glocos) for the sale, advised against a rise above 330p, citing the risk involved and necessity of having to offer retail investors two days' withdrawal rights.

The view was endorsed by the Government's independent advisers at Lazards, Mr Cable said.

But he added: "The Glocos subsequently advised us to expect a volatile after-market with the risk of a significant (upward) spike in share price."

This was because of the momentum behind the privatisation, widespread predictions of such an increase in the media, shortage of initial supply of the stock, and the delaying of a union strike ballot.

Save Our Royal Mail campaign director Mario Dunn said: "Business Secretary Vince Cable is now claiming that if the Government had priced Royal Mail shares above 330p demand would have dropped.

"This is nonsense. Mr Cable is directly responsible for the taxpayer losing hundreds of millions of pounds. He should do the decent thing and resign."

PA

Start your day with The Independent, sign up for daily news emails
Voices
Barn owls are among species that could be affected
charity appeal
News
Sarah Silverman (middle) with sister Reform Rabbi Susan Silverman (right) and sister actress Laura Silverman (left) at Jerusalem's Western Wall for feminist Hanuka candle-lighting ceremony
peopleControversial comedian stages pro-equality Hanukkah lighting during a protest at Jerusalem's Wailing Wall
Arts and Entertainment
The Bach Choir has been crowned the inaugural winner of Sky Arts’ show The Great Culture Quiz
arts + ents140-year-old choir declared winner of Sky Arts' 'The Great Culture Quiz'
Sport
After another poor series in Sri Lanka, Alastair Cook claimed all players go through a lean period
cricketEoin Morgan reportedly to take over ODI captaincy
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas