27th September 2013
The Royal Mail Initial Public Offering has opened-up and small investors are lining-up in their droves to get a piece of the action writes Philip Scott.
Stuart Welch, CEO, of stockbrokers TD Direct Investing says: “Despite recent comments around low interest in this IPO, we have seen thousands of customers registering and continue to see more doing so every day.”
For his part, Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers adds: “There has been significant interest from private investors registering for the Royal Mail share offer.
“Now the offer is open and the prospectus published, we will see how much of this interest will translate into people applying for shares.”
The price range has been set between at 260p to 330p per share and retail investors can get a piece of the action for as little as £750. With the stock price at this level, this implies a market capitalisation of between £2.6bn and £3.3bn.
But keen investors will have to move quickly as the share offer is only open until 8 October.
The government said it plans to pay a full-year 2014 dividend totalling £200m. The offer price range implies a dividend yield of between 6.1% and 7.7% – a potentially very attractive factor to savers who are enduring paltry interest rates in high street bank accounts.
In a statement the government said that 10% of the shares, which will be priced between 260p and 330p, will be given to around 150,000 eligible UK-based Royal Mail employees. Distributed equally an allocation would be worth around £2,200 each.
The government is expected to sell between 40.1% and 52.2% of the Royal Mail under its privatisation proposal.
Business Secretary Vince Cable said: “This will give Royal Mail access to the private capital it needs to modernise, as envisaged under successive governments and enshrined in law by Parliament two years ago.”
Moya Greene, chief executive of Royal Mail, adds: “We will now be better able to compete in what is a fast changing and intensely competitive market.”
The Labour Party has come under pressure from the trade unions to promise to re-nationalise the service if it wins the election but the party say it will cannot make such promises at least until it sees what it would cost the tax payer.
Conditional dealings in the shares on the London Stock Exchange are expected to commence on 11 October.
What are the stockbrokers saying
Hunter says: “We expect their dividend policy to be of interest to investors. Time is short and the offer is expected to close on Tuesday 8 October 2013 and therefore prospective investors should act soon.”
Gavin Oldham, chief executive at The Share Centre says: “This is a major opportunity to buy shares in one of Britain’s best known companies, a highly respected part of everyday life. What is less well-known is the transformation of the Royal Mail’s prospects through its parcel delivery service, responding to the surge in online shopping.
“Doorstep deliveries for goods purchased on the internet, efficient operations and competitive pricing should provide investors with a lower to medium risk investment with the potential of good dividends.”
Welch, of TD Direct Investing adds: “Do your own research first. Make sure you read the company’s prospectus, along with the pricing notification. While there is no guarantee of success, knowledge and understanding is the right start to making your own investment decisions.
“Consider how buying these shares will impact both your short and long term investments and financial goals. Think about timing and consider whether you are looking for income (via dividends), or growth (via an increase in the share price).”
Interested investors can download the prospectus and supplementary information plus everything they need to apply for shares via any retail stockbrokers.