The price of Royal Mail shares has increased by 35%, leading to thousands of investors profiting just days after they made their initial investment
Almost 700,000 punters across the country have purchased £750 worth of shares and have witnessed an instantaneous increase in the shares worth as prices rose by 35%.
The increase means that investors have already made more than £250 on their stake with prices rising to 450p on Friday morning, compared to the starting price of 330p.
The news comes after a period of intense scrutiny on the government for supposedly undervaluing the price of the Royal Mail and subsequently selling the shares for too cheap.
Critics have cited that that it is the taxpayer who is set to pay the price for the governmentís mistake as investors are set to continue to benefit from the institutions success.
In the past few days the Royal Mailís market value has soared to £4.5 billion representing a £1.1 billion increase. This is despite the government previously scorning commentators who have previously identified its value to be at around £4.5 billion as being ìway outî.
It is thought that if the government had chosen to follow the course of action advocated by these spectators and priced the shares at 450p as oppose to 330p that they would have earned an added £700m for the taxpayer.
Chuka Umunna, Labour’s shadow business secretary, stated: “Royal Mail is being sold off on the cheap with taxpayers being short-changed to the tune of hundreds of millions of pounds. Yet out of touch ministers have ploughed on regardless and claimed this is a ‘triumph’.
“Increasingly this privatisation is looking like a botched job from an out-touch government that puts the wrong people first.”
The Secretary of State for Business Vince Cable has come under intense pressure recently for his decision to price the shares so low.
Cable has responded by branding the share price increase as ìfrothî and has encouraged people to focus on the long term implications of the sale rather than the moderate happenings of right now.
However, Stockbrokers Peel Hunt has come out saying: “This is not ‘froth’; it’s real people buying, selling, averaging down.”
The speculation about the shares being undervalued has arisen after a period of huge demand for the shares from punters across the UK.
It is thought over 100 million shares were purchased in the first hour of trading on Friday whilst an estimated 700,000 people were given 227 shares worth £750.
It is thought that the demand for shares is over 7 times as much as the value for demand and speculation has risen about whether the government will sell a further stake in the business in order to address its huge popularity.
However, the unusually high demand for the shares has sparked debate about why so many people are investing in them and whether the government did in fact completely undervalue the business.
Cable has asked people to think about the long term future of the Royal Mail and has identified his resistance against rich investors as an indicator that it his intention to leave it in the right hands.
Almost 40,000 people who tried to acquire more than £10000 worth of shares were denied any form of sale at all.
It is also thought that government denied a number of city investors and hedge funds in a bid to keep the business out of their hands.
Cable identified that demand across the country was so large that the government was able to stop shares being sold to “spivs and speculators” and instead could focus on sales to “responsible long-term institutional investors”.
It is thought that people who privately invested will have to wait until Tuesday before they will be able to sell their stakes in the Royal Mail.
Meanwhile, the National Audit Office will launch an inquiry into the allegations that the business was sold too cheap as the debate heats up about whether taxpayerís have truly been shafted.