Royal Mail flotation: Key questions as excitement builds over 'undervalued' shares

When is the earliest private investors can sell their shares?

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The Independent Online

It is now just a week until Royal Mail shares begin official trading in the biggest Government flotation for two decades.

But as excitement builds around the privatisation, there are questions over whether all the applicants will receive shares, the exact price of the stock and how the launch of the initial public offering will work.

When will investors know the final price for shares?

Shares were initially priced at between 260p and 330p, but the guidance has since been revised to between 300p and 330p, which would value Royal Mail at around £3.3 billion.

The final price will be announced on Friday, when "conditional share dealing" begins.

Spread betting firm IG Index said the so-called pre-flotation "grey market" is seeing investors bet that the share price will start at 403p.

What does conditional share dealing mean?

After the offer closes at midnight today and once the offer price has been confirmed, shares can be unofficially traded by institutional investors - who will own around 70 per cent of shares under the offer.

This is known as conditional trading, when City institutions can buy and sell shares between each other. This period allows shares to settle at the right level before official trading starts.

When will shares start open trading?

Full trading will begin next Tuesday, October 15, when all investors can buy and sell shares in Royal Mail.

So when does the flotation kick off?

The flotation effectively launches with conditional dealing on Friday and this is the day when it will be clear if the Government has under-valued the privatisation.

IG Index expects the closing price of shares will be between 392p and 412p by the end of the first day of conditional dealing.

When will investors know how many shares they have been allocated?

This will depend on how investors applied for the shares. Those that applied through one of the more than 60 authorised brokers acting as intermediaries for the flotation may find out on Friday how many shares they have been allocated, although it depends on the individual broker.

Those who applied direct through the Government's Royal Mail share offer website will find out next Tuesday, or within two days of full trading at the latest, while those that applied through the post will have their share allocations confirmed by letter, which will be sent out on Tuesday and arrive within a week.

What if the shares are over-subscribed?

It is expected that there has been a tremendous amount of demand from retail and institutional shareholders for the flotation, which may mean investors do not receive all of the shares they applied for.

The Government has not announced what it will do if shares are over-subscribed, although Business Minister Michael Fallon sought to assure he was "committed to making sure smaller investors get their fair share".

Up to 62 per cent of the business will be sold, with the rest remaining state-owned. But the Government has already said it may sell another 15 per cent of its stake if demand for the shares is very high in what is called an "over-allotment" option.

The total amount of the business being sold will be decided after the share offer closes.

When is the earliest private investors can sell their shares?

General investors will be able to trade their shares from October 15. But those that applied for shares through brokers offering conditional dealing will be able to trade from Friday.

Royal Mail employees who are given shares for free will be unable to sell those shares for three years.

How can investors sell their shares and how much will it cost?

Investors who buy shares through brokers can sell them using those intermediaries, for a fixed fee as low as £5.95.

Those who have bought direct through the official website or by post can sell online or by phone. If dealing by phone, they will have to pay a 1% commission charge set at a minimum of £25. The commission charge is also 1% for selling online, but with a minimum of £17.50.

But there will be a temporary telephone and postal dealing service that allows investors to sell shares, with a commission charge of 0.75 per cent of the value of the transaction, set at a minimum of £7.50.

Investors who have applied to receive hard copies of their share certificates will pay even higher fees through a firm called Equiniti, which handles share dealing and issues share certificates.

It charges 1.5 per cent of the value of share certificates, at a minimum of £45, for conducting the sale if a certificate has been issued. There is also a £42 replacement charge for lost certificates.

But shares bought direct through the Government can be transferred to another broker account at a later date, at a cost of £10.