Royal Mail soared in value by more than £1billion after shares began trading on the stock market for the first time.
Nearly 700,000 small investors saw their stakes rocket in value by up to 39%, while some post workers notched up more than £1,000 in paper profits during their morning deliveries.
But amid the flotation fever in the City, ministers were facing accusations that financiers have been allowed to profit from public assets being sold off cheaply. A demonstration against the sell-off was held outside the London stock exchange, with protesters dressed as robbers.
Billy Hayes, general secretary of the Communication Workers Union, said the flotation was “a tragedy” and a ballot among workers next week was likely to back industrial action.
He added: “(Business Secretary) Vince Cable, one of the cleverest men in British politics, has made one of the stupidest decisions he is ever likely to make as a politician.”
Mr Cable dismissed claims Royal Mail was undervalued, saying the sharp price rise was no more than “froth and speculation” and insisting the sale was a good deal.
Shares representing a 52.2% stake in Royal Mail were snapped up at a price of £3.30 by institutional investors, who were allocated two-thirds of the stock. Ordinary members of the public – or “retail investors” – were given the rest. Stockbrokers were overwhelmed by the interest as conditional dealing began, with over 100million shares traded in the first hour, sending the price up to a morning high of 459.2p.
That valued Royal Mail at nearly £1.3billion more than the £3.3billion implied by the offer price, although the shares later settled at around £4.40 – still one-third higher than investors paid for the stock.
At the peak price, retail investors who each paid around £750 for a tranche of 227 shares, would have been sitting on paper profits of more than £290. Those who bought through brokers were able to cash in immediately, with bundles of 227 shares being sold off throughout the morning.
Around 150,000 Royal Mail employees saw the value of their free stakes – initially priced at around £2,200 – rise to more than £3,000, although they cannot sell for three years.
A further 15,000 who took part in the offer to buy shares will have seen total paper profits of more than £1,000.
Stockbroker Hargreaves Lansdown said the offer had created unprecedented interest, leaving its website struggling to cope with demand.
Richard Hunter, the firm’s head of equities, added: “There’s been a fair amount of selling interest. Some people have decided to bank their profits. Having said that, the stability of the price suggests those sales are being mopped up as well.”
Joe Rundle, of ETX Capital, said it was a “dazzling stock market debut” but warned the threat of industrial action, a lack of adequate capital and an unclear growth strategy could weigh down Royal Mail’s shares in future.
Taxpayers have been left with a 37.8% stake in the company, though this could be reduced to 30% depending on a so-called “over-allotment” option which is dependent on price performance following the flotation.