Royal Mail 'sold on the cheap' with British investors blocked

Critics hit out at 'botched fire sale' as 40,000 retail backers miss out and listing is oversubscribed

The Government blocked 40,000 Britons seeking to buy more than £10,000 worth of shares in Royal Mail's £3.3bn privatisation in its "botched" attempt to deal with huge demand.

Around 700,000 small investors tried to buy shares, leaving the IPO seven times subscribed. Faced with the dilemma of how to balance supply and demand, ministers opted to shut out the wealthy.

The latest details of the sell-off, released last night only hours before the start of conditional trading at 8am today, revealed that 93,000 private investors who applied for between £750 and £10,000 of shares will receive 227 shares worth £749.10. But the Department for Business said anyone who applied for more than £10,000 of shares – 5 per cent of applicants – will receive none. The Government claimed this move was "in line with the treatment of larger applications in previous well-oversubscribed privatisations", but it was widely condemned.

"It is unusual to exclude some applicants altogether; there would normally be a scaling back," said Richard Hunter of the stockbroker Hargreaves Lansdown. "This will be a great disappointment to those who have missed out." The anger of these small investors will be compounded when the list of Royal Mail's major investors is unveiled. While 35,000 retail investors saw their share requests either stymied or rejected, sovereign wealth funds, including those in Kuwait and Singapore, have ordered millions of pounds worth and the Government's ambition to have a diverse investor base means they are likely to be named as major shareholders. But the Department for Business said it had awarded 33 per cent of the available shares to retail investors – slightly more than expected – with 67 per cent going to the City, pension funds and foreign sovereign wealth funds. It said 270,000 private investors will get at least half the shares they applied for.

The Business Secretary, Vince Cable, said he had "struck the right balance" in the IPO. But although shares open for conditional trading are priced at £3.30, the top end of the Government's range, critics insist that ministers woefully undervalued Royal Mail. They point out that retail investors had placed orders for £4bn of shares and institutions £23bn – a total of more than £27bn chasing stock valued at £1.7bn. "Now everyone knows that Royal Mail has been undervalued and sold on the cheap," Billy Hayes, the general secretary of the Communications Workers Union said. "The low share price is another government error compounding the mistake to sell in the first place."

The Royal Mail's 150,000 UK staff are to get 10 per cent of the shares for free, or about £2,200 each.

Chuka Umunna, the shadow Business Secretary, said: "It says it all about the Royal Mail fire sale that just hours before it is floated, the Prime Minister and Deputy Prime Minister were being dragged into emergency meetings on the Royal Mail.

"This privatisation is looking like a botched job… A centuries-old and much-loved national institution [has been] flogged off in a fire sale to fill the hole left by George Osborne's failed economic plan."

The next task for the Government is to return payments to 35,000 consumers who missed out by 21 October.

Stamp of approval for sovereign wealth funds

Some of the world's largest sovereign wealth funds are set to be allocated shares in the Royal Mail sell-off.

State-backed investment vehicles from Kuwait and Singapore were among those to apply for a stake in the postal service yesterday.

The City-based branch of the Kuwait Investment Office expressed an interest, as did the Government Investment Corporation (GIC) of Singapore, chaired by the Singapore prime minister Lee Hsien Loong. In recent years, sovereign wealth funds have snapped up assets across the world. In the UK, these range from Manchester City Football Club to the new City skyscraper, The Shard, to the supermarket giant Sainsbury's.

The foreign influx is likely to raise eyebrows, with so many British retail investors expected to miss out on Royal Mail shares, despite applying. Ministers were keen to have a geographically diverse investor base. Figures from the 2014 Preqin Sovereign Wealth Fund Review, published yesterday, reveal that the funds currently have $5.38 trillion (£3.36 trillion) under management, compared with $4.62 trillion in 2012.

The world's largest vehicle of this type is Norway's national fund, which has $775.2bn in assets under management

Amy Bensted, head of hedge fund products at Preqin, said: "Despite the challenging financial landscape and political unrest, sovereign wealth funds have continued to thrive and to grow, and this trend is predicted to continue over the next few years."

Jamie Dunkley

Suggested Topics
PROMOTED VIDEO
News
ebooksNow available in paperback
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

Citifocus Ltd: Newly Qualified Accountants - Risk Mgmt

£Attractive Package: Citifocus Ltd: Prestigious financial institution seeks to...

Citifocus Ltd: Operational Risk Analyst

£Negotiable: Citifocus Ltd: Experienced operational risk professional with ban...

h2 Recruit Ltd: Business Development - Telecommunications - £50,000 OTE

£25000 per annum + £50,000 OTE: h2 Recruit Ltd: London, Reading , Southend, Al...

Recruitment Genius: Call Centre Agent - £22,000 OTE

£18000 - £22000 per annum: Recruitment Genius: As a Call Centre Agent you will...

Day In a Page

Homeless Veterans Christmas Appeal: Drifting and forgotten - turning lives around for ex-soldiers

Homeless Veterans Christmas Appeal: Turning lives around for ex-soldiers

Our partner charities help veterans on the brink – and get them back on their feet
Putin’s far-right ambition: Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU

Putin’s far-right ambition

Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU
Tove Jansson's Moominland: What was the inspiration for Finland's most famous family?

Escape to Moominland

What was the inspiration for Finland's most famous family?
Nightclubbing with Richard Young: The story behind his latest book of celebrity photographs

24-Hour party person

Photographer Richard Young has been snapping celebrities at play for 40 years. As his latest book is released, he reveals that it wasn’t all fun and games
Michelle Obama's school dinners: America’s children have a message for the First Lady

A taste for rebellion

US children have started an online protest against Michelle Obama’s drive for healthy school meals by posting photos of their lunches
Colouring books for adults: How the French are going crazy for Crayolas

Colouring books for adults

How the French are going crazy for Crayolas
Jack Thorne's play 'Hope': What would you do as a local politician faced with an impossible choice of cuts?

What would you do as a local politician faced with an impossible choice of cuts?

Playwright Jack Thorne's latest work 'Hope' poses the question to audiences
Ed Harcourt on Romeo Beckham and life as a court composer at Burberry

Call me Ed Mozart

Paloma Faith, Lana del Ray... Romeo Beckham. Ed Harcourt has proved that he can write for them all. But it took a personal crisis to turn him from indie star to writer-for-hire
10 best stocking fillers for foodies

Festive treats: 10 best stocking fillers for foodies

From boozy milk to wasabi, give the food-lover in your life some extra-special, unusual treats to wake up to on Christmas morning
Phil Hughes head injury: He had one weakness – it has come back to haunt him

Phil Hughes had one weakness – it has come back to haunt him

Prolific opener had world at his feet until Harmison and Flintoff bounced him
'I have an age of attraction that starts as low as four': How do you deal with a paedophile who has never committed a crime?

'I am a paedophile'

Is our approach to sex offenders helping to create more victims?
How bad do you have to be to lose a Home Office contract?

How bad do you have to be to lose a Home Office contract?

Serco given Yarl’s Wood immigration contract despite ‘vast failings’
Green Party on the march in Bristol: From a lost deposit to victory

From a lost deposit to victory

Green Party on the march in Bristol
Putting the grot right into Santa's grotto

Winter blunderlands

Putting the grot into grotto
'It just came to us, why not do it naked?' London's first nude free runner captured in breathtaking images across capital

'It just came to us, why not do it naked?'

London's first nude free runner captured in breathtaking images across capital