Royal Mail shares: City broker says shares are undervalued by 80% as investor bonanza and questions for Vince Cable loom

 

A City stockbroker has said the Royal Mail £3.3billion sell off could have been underpriced by up to 80 per cent.

Canaccord Genuity believe the Royal Mail should be valued at a sum closer to £6billion, or 559p per share, compared to the 330p price per share the Government is expected to charge when trading begins.

Shares were initially priced between 260p and 330p, but were raised to 330p by the Government following strong demand, the BBC has reported.

Business Secretary Vince Cable said approximately 700,000 applications were made by Tuesday night's deadline, which he believed demonstrated the high level of interest in the controversial privatisation.

Mr Cable faced tough questions from the Business Select Committee over concerns that the company has been undervalued. Committee chairman Adrian Bailey said the Government was overseeing the sale of a profitable, popular, publicly owned company to financial institutions that Mr Cable had criticised in the past.

However, Mr Cable said he was “very comfortable” with the sale, stressing the Government wanted to secure a “long term, responsible” investor base from organisations such as pension funds.

Ministers have since held emergency talks about the final allocation of Royal Mail shares after applications from private investors were up to seven times over-subscribed.

The Government is now expected to decide that those who tried to buy large shares of £10,000 or who made big applications could see them scaled back or receive no shares at all, the BBC has reported.

The coalition is expected to decide on the "cut-off" point within the next few hours.

But smaller investors who applied for the minimum shares on offer of £750 will receive their full order.

Those who applied for between £750 and £10,000 will receive a proportion of the amount they applied for.

Demonstrators have now announced they will stage a protest outside the stock exchange in the City of London dressed as bank robbers to mark the first day of conditional trading in Royal Mail shares tomorrow.

Business minister Michael Fallon said on Monday that he was "committed to making sure smaller investors get their fair share".

Smaller investors have been offered 30 per cent of the shares and the rest will go to institutional investors, such as pension funds. A 10 per cent stake has been reserved for Royal Mail employees.

CWU members are expected to back industrial action over issues linked to privatisation, with any strike set to be held on or after 23 October, leading up to the busy Christmas period.

In written evidence to the select committee, the Government said the Royal Mail was on the road to sustainability, with an increase in its operating profit to £403 million.

“Royal Mail must continue the process of modernisation and transformation, and must be able to invest to grasp new business opportunities,” the submission said.

“It should be able to access flexible capital so that it can continue to modernise and innovate, invest and seize opportunities presented by new markets such as the rapid growth of online shopping.”

The Northern Ireland Assembly passed a motion saying the Royal Mail is a vital public service which should not be privatised and voicing concern that the sell-off "would add to the costs of Northern Irish businesses and consumers if the universal service obligation and uniform pricing are withdrawn".

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
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 General

Ashdown Group: Client Accountant Team Manager - Reading

Negotiable: Ashdown Group: The Ashdown Group has been engaged by a highly resp...

Recruitment Genius: Account Manager

Negotiable: Recruitment Genius: You will also work alongside their seasoned sa...

Recruitment Genius: Assistant Property Manager

£15000 per annum: Recruitment Genius: Are you looking for your first step into...

Recruitment Genius: Mechanical Design Engineer

£25000 - £40000 per annum: Recruitment Genius: This innovative company working...

Day In a Page

General Election 2015: The masterminds behind the scenes

The masterminds behind the election

How do you get your party leader to embrace a message and then stick to it? By employing these people
Machine Gun America: The amusement park where teenagers go to shoot a huge range of automatic weapons

Machine Gun America

The amusement park where teenagers go to shoot a huge range of automatic weapons
The ethics of pet food: Why are we are so selective in how we show animals our love?

The ethics of pet food

Why are we are so selective in how we show animals our love?
How Tansy Davies turned 9/11 into her opera 'Between Worlds'

How a composer turned 9/11 into her opera 'Between Worlds'

Tansy Davies makes her operatic debut with a work about the attack on the Twin Towers. Despite the topic, she says it is a life-affirming piece
11 best bedside tables

11 best bedside tables

It could be the first thing you see in the morning, so make it work for you. We find night stands, tables and cabinets to wake up to
Italy vs England player ratings: Did Andros Townsend's goal see him beat Harry Kane and Wayne Rooney to top marks?

Italy vs England player ratings

Did Townsend's goal see him beat Kane and Rooney to top marks?
Danny Higginbotham: An underdog's tale of making the most of it

An underdog's tale of making the most of it

Danny Higginbotham on being let go by Manchester United, annoying Gordon Strachan, utilising his talents to the full at Stoke and plunging into the world of analysis
Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police

Steve Bunce: Inside Boxing

Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police
No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat