Last minute rush to buy 'undervalued' Royal Mail shares as investors sense instant profit

Private investors stand to pocket an instant 25 per cent return after the sell-off

With the deadline for buying shares in the Royal Mail midnight tonight, investors were this morning rushing to apply, in the hope of pocketing an instant return of up to 25 per cent,

Throwing weight behind Labour’s claims that the Government has undervalued the 500-year-old operator by £600m, City bets placed ahead of Royal Mail’s stock market debut forecast that the shares – on sale for no more than £3.30 each – will leap to as much as £4 on the first day of trading.

IG Index, a spread-betting company, expects Royal Mail’s closing price on Friday, the first day of conditional trading, to be between 392p and 412p. As a result hedge funds, investment banks and private investors will enjoy an instant profit of as much as 25 per cent.

Private investors face a deadline of midnight on Wednesday for purchase applications, but stockbrokers kept their offices open all weekend in the rush to snap up shares.

IG’s chief market strategist David Jones said demand had been as strong as when Facebook floated in the US.

Mr Jones said some investors had even started selling shares on the “grey market”, which takes place before shares are officially launched, because they were already making a profit on their purchase price.

“The private investors who are subscribing to Royal Mail are going to do well, the same way they did when BT and the electricity companies floated,” he said. “It’s easy to criticise the Government for selling it too cheap, but ministers had to tread a fine line between making sure there was appetite to be buyers, and pricing it so expensive that it could be a failure.”

Ahead of the announcement of the offer price on Thursday at 7am, where the Government’s sale price would see it valued at up to £3.3bn, Gert Zonneveld, managing director of stockbroker Panmure Gordon, predicted Royal Mail could prove to be worth as much as £4.5bn.

Labour has attacked the Government over its valuation of the business and is preparing to challenge the Coalition over the sell-off in the Commons this week. Chuka Umunna, the shadow Business Secretary, told The Independent: “There is mounting evidence to suggest Royal Mail has been very significantly undervalued, meaning taxpayers are set to lose out on hundreds of millions of pounds.”

The Department for Business argues that a better assessment of the company’s true value will not be possible until a few months after the flotation.

To get the float on its way, the Government and Royal Mail have paid City firms fees of about £50m. Mr Umunna added that Royal Mail’s prime property assets could be sold off, giving a quick windfall to investors but leaving taxpayers short-changed. Royal Mail’s prospectus highlights London sites at Mount Pleasant and Nine Elms as being “surplus”.

Meanwhile, union members are expected to push ahead with strike action later this month. The Communication Workers Union has balloted its members on strike action over the planned privatisation. The vote closes on 16 October with the earliest any strike could be held a week later.

Independent Comment
blog comments powered by Disqus
Arts & Entertainment
Bob Dylan performs on-stage in June 2009 in California
arts + entsReview: The folk star wows David Lister at the Albert Hall, London
Arts & Entertainment
The Duke of Cambridge singing with Taylor Swift and Jon Bon Jovi at the Centrepoint Gala Dinner at Kensington Palace, London
arts + entsVideo: Duke steps up to the mic with Jon Bon Jovi and Taylor Swift
Arts & Entertainment
Niall Horan, Liam Payne, Harry Styles, Louis Tomlinson and Zayn Malik of One Direction performing in New York
music Teenage fanbase left behind as band go to Radio 2
Life & Style
tech
VIDEO
Sport
Jack Wilshere celebrates scoring Arsenal's first goal
sport But Dortmund deny Gunners chance to qualify automatically
Arts & Entertainment
filmThe six best Slightly Wrong Quotes t-shirts to irritate pedants
Extras
indybest
Sport
Andy Murray poses with the 2013 Wimbledon trophy at the All England Club in Wimbledon, a day after he won the men's singles final match against Novak Djokovic. Murray said he is determined to push on from his stunning Wimbledon win and add further Grand Slam titles to his achievements
sport A closer look at the sportsmen and women shortlisted for the BBC Sports Personality of the Year 2013
Life & Style
Fare trade: Moor market sells local foods
food + drink The first new city-centre market for 10 years has opened in Sheffield
Arts & Entertainment
Found in translation: Daniel Hahn (left) stares down a wordy foe in a duel
books Two literary translators go head to head in a book-filled battle
Voices
voices Pubic hair is reclaiming its reign atop and amongst our genitalia, and that's a reason to celebrate, says Felicity Morse
Arts & Entertainment
Grey man: Ben Stiller in 'The Secret Life of Walter Mitty'
arts + ents How Ben Stiller ended up starring in a remake that took 20 years
Extras
indybest
Arts & Entertainment
Bernardine Bishop
books Posthumous nomination for Bernardine Bishop
Arts & Entertainment
Brian Griffin chats up Lauren Conrad in Family Guy season seven
television
Sport
sportQuiz: Try the five questions failed by Sports Minister Helen Grant?
Arts & Entertainment
The V&A says it has discovered a previously unknown oil sketch by John Constable tucked beneath the lining of another work
artV&A restorers uncovered found work hidden behind one of his famous paintings
Arts & Entertainment
Mary Berry and Paul Hollywood will present a Christmas Bake-Off masterclass
arts + ents
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Banking Litigation

£70000 - £89000 per annum: Pro-Recruitment Group: Banking Lawyer sought for a ...

Derivatives Solicitor

£100000 - £120000 per annum + benefits : Pro-Recruitment Group: £££ Derivative...

Business Process Analyst- Financial Services

£450 - £500 per day: Cornwallis Elt : Business Analyst, Business Process Analy...

Big 4 - FS - Manager

£55000 - £70000 per annum + Benefits: Pro-Recruitment Group: Big 4 - FS - Mana...

Day In a Page

New Eastern European migrants to face tough new measures for benefits

New Eastern European migrants to face tough new measures for benefits

David Cameron targets 'benefit tourism' from Romania and Bulgaria
Angela Merkel reaches deal with SPD to form German 'grand coalition'

Merkel reaches coalition deal

Union bloc and Social Democrats reach agreement after late night talks
China monitors US bombers over South China Sea

China monitors US bombers over South China Sea

Move by planes followed Beijing's declaration it was exercising greater military control over the area
Xbox One: Microsoft offers free game to owners of faulty consoles

Free games for faulty Xbox One owners

Some users experienced faulty disk drive
Revealed: Goldman Sachs clients’ £12m Royal Mail coup

Revealed: Goldman Sachs clients' £12m Royal Mail coup

Bank accused of providing Government with a 'knockdown' valuation of the Royal Mail
Maoist cult chief Aravindan Balakrishnan accused of keeping women slaves is revealed

Revealed: the man accusedof slavery

Details emerge of death at home that was used by Maoist cult in south London
Next US President? Fat chance. Chris Christie is a true heavyweight - but that's his problem

Next US President? Fat chance

Chris Christie is a true heavyweight - but that's his problem
'Iran will still make a nuclear bomb': Israel’s ambassador to the UK Daniel Taub argues the Geneva deal endangers us all

Iran will still make a nuclear bomb

Israel’s ambassador to the UK argues the Geneva deal endangers us all
Lost in translation: Why British ambassadors are on the back foot

Lost in translation: Why British ambassadors are on the back foot

Just three of the UK's ambassadors to the Arab world have a "high level of fluency" in an Arab language
The Secret Life of Walter Mitty: The return of the little man with the big imagination

From fantasy to reality – the new Walter Mitty

How Ben Stiller ended up starring in a remake that took a tortuous 20 years
Translation slam: A war of words

Translation slam: A war of words

Two literary translators go head to head in a book-filled battle
Scottish independence: Scots would be hit by £1,000-a-year 'tax bombshell,' Danny Alexander warns Alex Salmond

Scots would be hit by £1,000-a-year 'tax bombshell'

Danny Alexander warns Scots not to 'go it alone'
Children as young as 12 'are committing sex abuse on other children as part of gang violence'

Children are 'attacking and raping other children'

Children as young as 12 are carrying out sexual violence against each other, according to 'profoundly distressing' evidence
Sandy Hook massacre: Adam Lanza acted alone and had an obsession with mass killings

Sandy Hook killer was 'obsessed with Columbine'

Report reveals killer acted alone but falls short of a motive
Oil prices fall in wake of Iran nuclear deal

Oil prices fall in wake of Iran nuclear deal

Brent crude fell as much as $3 a barrel to a four-week low of $108.50