The government has allocated Royal Mail shares to almost 95 per cent of individual applicants, but anyone trying to buy shares worth more than £10,000 gets nothing.
Applicants wanting up to and including £10,000 all get something – all 690,000 of them.
Everyone seeking the minimum £750 allocation – over 93,000 people – get what they wanted.
In total over 270,000 applicants, equivalent to 37 per cent, will receive at least half of the shares they have applied for, while only 5 per cent will receive no allocation.
We are in a position to ensure that we do get the right kind of investor community. Business Secretary Vince Cable
Over 99 per cent of Royal Mail’s 150,000 UK-based eligible staff will receive a total allocation of just over 100 million free shares, equivalent to 10 per cent of Royal Mail’s share capital.
Institutional investors will receive about 67 per cent of the shares, compared to 33 per cent going to individual investors. The institutional share allocation was 20 times oversubscribed and the offer to members of the public was seven times oversubscribed.
Channel 4 News understands that about 90 per cent of the institutional investors are long-term, high quality companies including pension firms, insurers and sovereign wealth funds.
Business Secretary Vince Cable said: “We have struck the right balance, increasing the proportion of shares going to small investors to ensure they get their fair share and ensuring the employees get a 10 per cent stake in the business.”
The government is selling off 52.2 per cent of the state-owned postal service and about 700,000 share applications were received by the Department for Business, Innovation and Skills.
BIS is responsible for allocating shares to the various groups of applicants, whose money has already been taken in anticipation of the sell-off. The minimum purchase amount was £750 and applicants will be refunded any of their money not used to buy shares by 21 October.
Mr Cable told the Business, Innovation and Skills committee on 9 October that most of the non-institutional share applicants “are not very large private investors who are in to make a killing.”
“We’re trying to ensure that on this occasion the share book is dominated by responsible long-term institutional investors, who will help the Mail through a long period of adjustment,” Cable said.
“We are in a position to ensure that we do get the right kind of investor community. We’re talking about the pension funds and insurance companies that hold the savings of millions of people. That’s the kind of relationship we want to have, that is long termism.”
Labour’s shadow business secretary, Chuka Umunna, has already said the government should “pull the plug” on the sale because Royal Mail has been undervalued by about £1bn. But the government was keen to make sure that all the shares were snapped up, and Mr Cable said the high level of demand for shares “suggests that we didn’t overprice it”.
Labour has also criticised Royal Mail’s valuation of its property portfolio, saying its three big sorting stations at Mount Pleasant, Paddington and Nine Elms could bring in hundreds of millions pounds more than estimated.
But the group owns or leases a portfolio of 2,000 more around the country that it may also wish to reshape. Selling off sites and leasing them back would take assets off Royal Mail’s balance sheet and bring in extra cash up front. It may also want to sell off clusters of small town centre sorting offices in favour of fewer, big sites on the outskirts.
Royal Mail denies it will sack workers after part-privatisation to bolster profits, but will continue to slim down its workforce as part of a long term restructure.
The group has cut 50,000 jobs over the last 10 years through voluntary redundancy and natural attrition and will seek to shed further staff in future using the same methods.