Royal Mail Q&A: who will own the privatised mail service?
Thousands of investors likely to miss out after Royal Mail shares hugely over-subscribed
SHARES in the privatised Royal Mail will be priced at 330p, the top end of the government's pricing range, after applications massively outstripped the number of shares on offer. There have been 700,000 applications for shares, with the sell-off over-subscribed nearly seven times over, meaning thousands of investors are likely to miss out. Here's what you need to know about the controversial privatisation:
Who will own the Royal Mail?
The government is selling 52.2 per cent of the company to institutional investors and private individuals, putting the value for the Treasury of the privatisation at £1.7bn. More than 100,000 applications have come direct from members of the public, who lodged requests ahead of Tuesday's midnight deadline. Royal Mail staff will be given 10 per cent of shares at no cost, although they will have to hold onto them for up to five years to avoid triggering a tax liability on the sale. The Post Office and its branches are not for sale. Shares will begin full trading next Tuesday.
Is the Royal Mail being undervalued?
Labour has accused ministers of offloading the mail service on the cheap, enabling City speculators to make millions from the sell-off. Chuka Umunna, the shadow business secretary, has said the huge demand for shares shows that it has been undervalued and that taxpayers will be ripped off as a result. Business Secretary Vince Cable insists the price is right and warned Labour that it was "dangerous" to imply there was an easy bargain to be made.
Why is the Royal Mail being privatised?
The Government says the Royal Mail needs access to private capital in order to grow and modernise. A boom in internet shopping means parcel delivery is becoming a more important part of the business than letter delivery, which is shrinking. Since the delivery market was opened up in 2006, the Royal Mail has faced tough competition from private operators such as TNT and UK Mail. Ministers and the Royal Mail management want to revamp the company accordingly, but ministers say there is little public money to pay for it.
Can we expect a postal strike?
The Communication Workers Union (CWU), which represents most Royal Mail workers, is vehemently against privatisation and threatening to strike. In a consultative ballot of three-quarters of its members in June, 96 per cent said they were against the sell-off. Many believe it will lead to a decline in standards and could harm working conditions. A strike vote for postal workers will close on 16 October, the day after shares begin trading on the London Stock Exchange, and the earliest strike could be held on 23 October. ·