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Huge demand for Royal Mail shares

Share price bounce on first morning of trading

Letters being posted through a postbox

Royal Mail shareholders enjoyed a bounce of more than 30% on the first morning of trading in the shares on the London Stock Exchange.

Over 690,000 private investors were allocated 227 shares each at a cost of £749.10, or 330p per share, following huge demand for the initial public offering. 

The shares then spiked in value on the open market, hitting 456p before settling around 440p in early trading.

Investors who applied through a stockbroker received their shares this morning and could sell them anytime, making an instant profit.

Royal Mail shares seven times oversubscribed

The retail offer, under which members of the public were able to apply for up to £50,000 worth of shares, was seven times oversubscribed, meaning that Business Secretary Vince Cable was forced to dramatically scale down allocations. 

Those who applied for £10,000 worth of shares or under were given the minimum allocation of shares irrespective of their requested amount, while those who asked for more missed out entirely.

Royal Mail shares: what happens now?

Many shareholders who bought through a stockbroker will be tempted by the possibility of a quick profit – a gain of around £250 after dealing commission was achievable based on early prices – but others will be happy to hold the shares for the long term. Royal Mail management has indicated that dividends of over 6% will be paid.

But some investors looking to trade quickly were frustrated when online dealing platforms struggled under the strain. Hargreaves Lansdown, one of the biggest brokers, apologised on Twitter after its systems were unable to cope with demand.

Those who applied for shares directly from the government will have longer to wait. Official notices to shareholders will be sent on Tuesday 15 October and it won’t be possible to sell until this confirmation is received.

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