U.K. Business Secretary Vince Cable said the initial public offering of Royal Mail Group Ltd. had drawn 700,000 applications for shares from retail investors.
Cable’s department didn’t encourage retail applications in the manner of the 1986 privatization of British Gas, now Centrica Plc, which was advertised on television, and set a monthlong timetable from announcement to the beginning of trading. Even so, the offering was seven times oversubscribed.
Testifying on the IPO to Parliament’s Business Committee in London today, Cable said he was looking to “place the shares with long-term investors.” He rejected suggestions from lawmakers that the popularity of the offering meant the price had been set too low or that ministers should consider a windfall tax on any property sales the privatized company might make.
The popularity of the offering means share orders priced below the maximum 330 pence risk missing out, two people familiar with the sale process said yesterday. The stock, set to raise 1.7 billion pounds ($2.7 billion) for the government, may gain 20 percent once trading starts, according to so-called gray market prices.
Looking at previously oversubscribed offerings, Cable said, “the trajectory of their subsequent share values has been very, very disparate -- some have gone down.”
Royal Mail’s privatization will be the biggest in the U.K. since British Rail was broken up in the 1990s. The IPO of the 360-year-old company, which has refocused on package-delivery markets spurred by a trend toward web-based purchasing, opened Sept. 27 and was fully subscribed within hours. The sale closed yesterday and conditional trading commences on Oct. 11.
Out of the company’s 150,000 staff, 371 have opted not to receive free shares in the company, Cable said.