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Royal Mail shares: how and when you can buy and sell

Cliff D'Arcy
by Lovemoney Staff Cliff D'Arcy on 11 October 2013  |  Comments 11 comments

With the share offer closed and trading under way, here's how to buy or sell your Royal Mail shares now.

Royal Mail shares: how and when you can buy and sell

In a financial frenzy not seen since the privatisations of the 1990s, British investors have flocked to buy shares in Royal Mail.

According to Business Secretary Vince Cable, the flotation of the postal operator has attracted around 700,000 applications from private investors. This has left the retail offer fully subscribed seven times over.

Postal privatisation fever

This huge demand for Royal Mail shares also means that HM Treasury is sure to exercise its 15% over-allotment option. This means that the Government will sell more of its holding than initially expected. It will raise £1.98 billion for the public purse by selling 60% of Royal Mail in a single offering.

Also, in order to satisfy high demand for shares from the public, many institutional investors (such as pension funds, insurance companies and hedge funds) had their allocations slashed. The institutional tranche of the offer was more than 20 times oversubscribed. Even so, these corporate shareholders have two-thirds of all shares sold, with the remaining third going to retail investors.

In addition, 100 million shares – 10% of the total – were given free to around 150,000 Royal Mail employees. With those free shares worth around £2,200, fewer than 400 employees have turned down this windfall.

You will get 227 shares

With the flotation massively over-subscribed, share allocations for both private and professional investors have been cut back – drastically, in some cases.

Individuals who applied for shares worth up to £10,000 will receive a mere 277 shares, worth £749.10 at the issue price of 330p. In other words, only those who invested the minimum £750 will receive their full allocation. Those hoping to invest more than £10,000 in Royal Mail will receive no shares. However, these wealthier investors represent only 5% of retail applicants.

This means that the vast majority of applicants – around 690,000 people – will receive exactly 277 shares, although those investing £10,000 will be disappointed to lose out.

Royal Mail employees applying through the Employee Priority Offer for up to £10,000 of shares will have their applications met in full.

Shares priced at 330p; dealing started Friday morning

'Conditional dealing' (between institutions) in Royal Mail shares began at 8am today (11th October). Full trading begins on Tuesday (15th October) when Royal Mail's official listing begins, but some shareholders will be able to sell from Friday onwards.

After the stock market closed on Thursday evening, the Government revealed the pricing and distribution of the shares. Initially, HM Treasury expected to price Royal Mail shares in a range between 260p and 330p per share. However, intense demand for shares means that they were priced right at the very top of this range at 330p, valuing Royal Mail at £3.3 billion.

This has led to accusations that Royal Mail's advisers grossly under-estimated demand for its shares and priced them far too cheaply. Royal Mail has a billion shares, so every extra 10p on the float price would have increased its value to taxpayers by £100 million.

Shares soar straight away

Thanks to its juicy dividend, I wrote a few weeks ago that Royal Mail shares offer a 'mouth-watering yearly income' to investors seeking income. In addition, I said that institutional investors with reduced allocations would pile into Royal Mail shares when trading begins, therefore pushing up their price.

Sure enough, the shares – which trade under the EPIC code ('ticker') of RMG – got off to a roaring start on Friday morning. As soon as the London Stock Exchange opened at 8am, the share price leapt by £1 to 430p. Within minutes, they had spiked to 456p, producing a 38% return for those sellers seeking an early exit.

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When can you sell?

Unfortunately, few retail investors will be able to sell on the first day, as this is reserved primarily for conditional dealing between institutions. Furthermore, how soon you can sell depends on how you applied for your shares.

So before you join the selling frenzy, first establish how and when you can sell, as follows:

  • If you applied via the official Royal Mail website

You will not be able to sell for a few days yet. In fact, you won't be told how many shares you have been allocated (which will be 227) until you’re sent an email on Tuesday 15th October. What's more, you cannot sell your shares until you have safely received your 'share account statement'.

  • If you applied via the Post Office

Applicants via Post Offices will be informed of their share allocations by post. These letters are expected to arrive on Monday 21st October. You may not be able to sell your shares until you have this official confirmation.

  • If you applied via a stockbroker

In total, 44 different intermediaries (stockbrokers and share dealers) took part in the public offer, with some websites and helplines crashing as last-minute demand peaked on Tuesday.

Each intermediary will contact its customers differently, so visit your broker's website for information on when you can start dealing. Most dealers providing online share accounts will allow you to deal without delay. It may be wise to deal online, as telephone dealing lines may well be overwhelmed by high call volumes, although some websites crashed repeatedly this morning.

What if I want to hold or buy?

Priced at 330p a share, Royal Mail shares offer a cash dividend worth 6.1% in the latest financial year, making them a 'high-yield' investment. With risk-free savings accounts paying just 2% a year, you may wish to hold onto Royal Mail shares in order to bank this handsome income. For those preferring capital gains, you can reinvest these chunky dividends into yet more Royal Mail shares, boosting your holding year by year.

With analysts at City broker Canaccord Genuity claiming that Royal Mail is worth 'up to 599p a share' (valuing the group at £6 billion), you may decide to buy more shares in the open market. You can do this in the usual way via your stockbroker or share-dealing service.

If you decide not to sell out in the early feeding frenzy, then you could well be rewarded for your patience. Previous privatisations, such as the sale of water and energy companies, have produced market-busting returns for investors over the past two decades.

On the other hand, investors in Railtrack's 1996 float lost fortunes when the network operator went into administration in 2001. After years of legal action, Railtrack shareholders won compensation from the Government worth 262.5p a share, so even they didn't lose everything.

Finally, Royal Mail's share price may take an early dip when industrial action begins, possibly as early as Wednesday (16th October). However, the impact of these strikes is likely to be short-lived and, therefore, will barely affect the postal operator's medium-term profitability.

Did you get any shares? Will you be holding or selling? Let us know in the Comments box below.

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Comments (11)

  • Simon Ward
    Love rating 8
    Simon Ward said

    In terms of selling them if you bought them on the Royal Mail website, you should have received an email with instructions. You can then sell them as follows:

    "In order to manage the anticipated high volumes and provide a route for Royal Mail Nominee Share Service participants who simply wish to sell all their shares during this time, Equiniti is providing an easy-to-use service exclusively for Royal Mail Nominee Share Service participants:

    a simple automated system using your telephone - no need to register or open an account

    charges: 0.75% of the transaction value, minimum £7.50

    available 24 hours a day - place your sale instruction at any time

    instructions will be added together with those of other customers and sold at intervals:

    received on a business day by 9.00 a.m. - sale by 11.00 a.m

    received on a business day by 1.00 p.m. - sale by 3.00 p.m

    received after 1.00 p.m., sale by 11.00 a.m. on the next business day

    a cheque will be sent to you two business days after the sale together with details of the transaction

    To use the service call 0845 268 8405 (from overseas +44 1133 697 777):

    the service will be available for instructions received up until 1.00 p.m. on Friday 8 November 2013

    a postal dealing service is also available during this period. If you requested a hard copy pack to be sent to you, you will receive a dealing form in the post in order that you can use this service if you would prefer. Alternatively, you can download a postal dealing form at www.shareview.co.uk/dealing

    to sell your shares, you should only use one of these services

    Other Equiniti dealing services are available during market hours:

    online at www.shareview.co.uk/dealing

    by telephone on 0845 268 0282 (from overseas +44 121 415 0250)"

    Note that the last two options are far more expensive than the automated phone line, although they will be in 'real time'.

    Report on 15 October 2013  |  Love thisLove  0 loves
  • minicooper
    Love rating 4
    minicooper said

    Dear Mr Miliband,

    I bought as many Royal Mail shares as they let me. I know I'm a mug as I owned it already. I'm going to keep them safe and not sell them on to city speculators who only care about short term profit. I'll use my shareholder's vote to protest about any proposed damage to the public service, job and wages cuts for the workers, massive pay rises for the management, etc. Please buy them back from me after the next General Election. You can have them for the 330p that I paid. I'll have had 6% return in dividends and I'm happy with that.

    Report on 20 October 2013  |  Love thisLove  1 love

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