Royal Mail Shares Soar In First Trades

Shares in Royal Mail have soared in conditional trading, with their value jumping more than 30%.

The spike has boosted the value of the company to more than £4.5bn, up from the pre-flotation pricing of £3.3bn.

Shares opened at 8am on the London Stock Exchange at 430p each and jumped above 450p within minutes.

The pre-float purchase price was set at 330p per share.

The rise will fuel the debate over whether the sale, one of Britain's biggest privatisations for decades, was priced too cheaply, following criticism from Labour that the Government was short-changing taxpayers.

The first two days of conditional trading allows institutional investors to trade with one another, with full trading getting under way next Tuesday.

In theory if the sale of the five-century-old service was cancelled the trades would be void.

Royal Mail's flotation leaves the Government with a 38% stake, but this could fall to 30% should it choose to exercise an over-allotment option, whereby extra shares can be sold if there is strong demand.

Demand from private investors for the flotation was seven times over-subscribed, with Business Secretary Vince Cable saying there had been 700,000 applications.

Around 150,000 Royal Mail staff will each get about £2,200 of free shares but they must hold on to them for a period of five years.

Full trading on October 15 commences the day before the result of a strike ballot by postal workers.

Members of the Communication Workers Union are expected to back industrial action over issues linked to pay and conditions, with any strike set to be held on or after October 23 - the start of the run-up to the busy Christmas period.

Although the Royal Mail has seen a decline in letter deliveries amid competition from private firms and increasing use of email, its parcel delivery service has strengthened due to internet shopping.

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