Royal Mail: shares surge as trading begins

Shares in the newly privatised Royal Mail jumped by 38 per cent in the first few minutes of trading on the London Stock Exchange.

The price, which had been set at 330p per share, reached a peak of 456p before settling back to 437p by 3pm - a rise of 32 per cent. That represents a paper profit of £240 for private investors who took part in the Royal Mail offer.

Investors who applied for up to £10,000 worth of shares - around 690,000 investors - will receive 227 shares worth £749.10. But the 34,500 investors who applied for more than £10,000 worth of shares will get nothing.

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In total, more than 270,000 applicants will receive at least half of the shares for which they applied.

Demand for shares in the mail service reached unexpectedly high levels, making it one of the most sought-after privatisations since the 1980s sell-off of state assets.

Critics last night claimed the decision had been made to enable the government to boast that it was a "people's privatisation".

Financial institutions, such as pension funds and hedge funds, took 67 per cent of all shares on offer, leaving the rest to small investors and Royal Mail workers.

Despite the looming postal workers' strike ballot, 99.7 per cent of Royal Mail employees took up their free allocation of shares. Any employees who applied for extra shares also had their applications met for up to £10,000.

Billy Hayes, general secretary of the Communication Workers Union, which is vehemently against privatisation, said he did not expect the take-up to affect the outcome of next week's strike ballot. He told the BBC: "In austerity Britain no one is going to turn down free money. The real test will be next Wednesday, and I am convinced that postal workers will vote for action."

Conditional trading began today at 8am - a process likened to the gap between exchange and completion when buying a home. Any trades agreed will not be fulfilled until full open market trading begins on Tuesday 15 October.

Shares look set to rise from 330p to around 400p by the end of day one, which would give investors with £749.10 of shares a profit of £158.