Shafted: the great Royal Mail rip-off
The price of Royal Mail shares has increased by almost 50%, from 330p to over 500p.
Thousands of investors have made huge profits just days after their initial investment.
Almost 700,000 small investors purchased £750 worth of shares and have witnessed an instantaneous increase in their value.
The government are under scrutiny for having undervalued the price of the Royal Mail.
It is the taxpayer who is set to pay the price for the government’s mistake as investors, large and small, are set to continue to benefit.
In the past few days the Royal Mail’s market value has soared to over £5 billion representing a £1.7 billion increase.
Chuka Umunna, Labour’s shadow business secretary, said: “Royal Mail is being sold off on the cheap with taxpayers being short-changed to the tune of hundreds of millions of pounds. Yet out of touch ministers have ploughed on regardless and claimed this is a ‘triumph’. Increasingly this privatisation is looking like a botched job from an out-of-touch government that puts the wrong people first.”
The Secretary of State for Business Vince Cable has responded by branding the share price increase as “froth” and has encouraged people to focus on the long term implications of the sale.
However, Stockbrokers Peel Hunt responded by saying: “This is not ‘froth’; it’s real people buying, selling, averaging down.”
It is thought over 100 million shares were purchased in the first hour of trading and an estimated 700,000 people were given 227 shares worth £750.
The unusually high demand has lead some commentators to question why so many people are investing in them and whether the government did in fact completely undervalue the business.
Cable has asked people to think about the long term future of the Royal Mail, and has indicated that he has attempted to keep the company in the right hands.
Almost 40,000 people who tried to acquire more than £10,000 worth of shares were denied any form of sale.
It is also thought that government denied a number of city investors and hedge funds in a bid to keep the business out of their hands, although 70% of the shares did, in fact, go to large investors.
Cable said that demand across the country was so large that the government was able to stop shares being sold to “spivs and speculators” and instead could focus on sales to “responsible long-term institutional investors”.
Meanwhile, the National Audit Office will launch an inquiry into the allegations that the business was undervalued.
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