Big gains on tap for small Royal Mail shareholders

[October 16, 2013]  LONDON (AP) -- Small shareholders in Royal Mail on Tuesday had their first opportunity to cash in on the stock's spectacular stock market debut.

Royal Mail shares first soared on Friday, when trading began, though only for big institutions and investors who bought through brokers. On Tuesday, trading was opened to the general public. That allowed small shareholders who bought stock through the government to sell their shares -- and pocket a near 50 percent windfall.

At the close, Royal Mail shares were 3 percent higher at 489 pence ($7.82). That's around 48 percent higher than the 330 pence at which the government initially priced the shares.

"With the short term return so strong, it's understandable smaller investors are looking to take some money off the table," said David White, a trader at Spreadex.

The sharp rise has led some to argue that the government sold the near 500-year-old company too cheaply.

"The Royal Mail share price has soared further, bringing more proof that the company was undervalued by the government's City mates," said Dave Ward, deputy general secretary of the Communication Workers Union, or CWU, which has balloted around 115,000 of its members for industrial action over issues linked to the sell-off, including pay and pensions.

A strike by postal workers could threaten disruption to mail deliveries in the busy weeks before Christmas. The result of the ballot is expected over the next day.

Investment bank Lazard is also set to be questioned next month by British lawmakers over the pricing of Royal Mail and concerns that institutional investors were allowed to buy into the company too cheaply.

[Associated Press; By PAN PYLAS]

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