Investors in last minute rush to buy Royal Mail shares

Investors have been rushing to buy shares in Royal Mail following claims the company has been undervalued, which could mean investors enjoy instant profits.

The deadline for buying shares in Royal Mail is midnight on Wednesday. Up to 62% of the company will be sold off with the government keeping the remaining 38%.

Shadow business secretary Chuka Umunna has said Royal Mail has been undervalued by as much as £1 billion, with City investors and hedge funds benefitting the most. Speaking on the BBC’s Today programme, he added that the sale is ‘short changing’ taxpayers.

In response, business secretary Vince Cable has said the pricing of Royal Mail is correct and that the price was set after ‘extensive consultation’ with investors. The Department for Business added that the value was dependent on a number of factors including the company’s on-going financial performance, future prospects and the level of interest.

Julian Parrott, partner at Ethical Futures, commented, “Delivery of mail on a universal cost bases for residential customers is a natural monopoly – just like the rail networks and power distribution and generation. I am fundamentally opposed to the continual stripping of the country’s assets in a double pronged strategy aimed at reducing the State and lining the pockets of ‘mega capital’.

“I’m not actually authorised to advise on individual shares but I’m sure that like me, many of my clients would be dismayed to see Royal Mail shares turning up in ethical funds, as they may well do.”

Further reading:

Government to privatise Royal Mail in weeks

World Bank urged to divest from private water firms

Treasury sells 6% of Lloyds stake, raking in £61m profit for the taxpayer

Government could start RBS privatisation in mid-2014