Royal Mail set for red letter day as £2bn surge prompts blue chip return

 
Oliver Gill
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Royal Mail was one of London's most over-subscribed IPOs when it floated in 2013 (Source: Royal Mail)

Royal Mail has added almost £2bn to its market value in the last four months, putting it on the cusp of a stunning return to the FTSE 100.

The postal giant was the UK's 88th largest listed firm at the start of this week. Since 1 November shareholders have been rewarded with a 50 per cent increase in the value of their stock.

Analysts from Cantor Fitzgerald said Royal Mail's market capitalisation would need to fall by around £260m for it to fall out of contention.

The firm was booted out of Britain's blue chip index last August after the threat of industrial action sent its shares to all-time lows. However, positive noises from talks ended with a pay and pension deal being struck earlier this year – prompting investors to flock back to the 502-year-old firm.

Read more: Union boss: Royal Mail deal will be “nailed down” this week

Read more: Intu shares jump 18 per cent as Hammerson makes £3.4bn offer

FTSE Russell officials will kick off the process of rejigging indices on Friday evening with the market caps at the end of business on 27 February being used in the final calculation.

Property giant Hammerson is set to crash out of the London's premier listing after seeing its shares fall over 10 per cent since announcing a £3.4bn deal to buy rival Intu Properties.

There are no slam-dunk mid-cap promotions. Southern rail owner Go-Ahead was facing relegation to the FTSE Small Cap but may well have been saved by a rally of more than 13 per cent today. Support services firm Mitie is likely to be dumped out of the FTSE 250 after sector concerns weighed on the value of its shares.

Read more: The AA has broken down. Can its new boss get the company back on track?

AA car crash

The AA, bruised from yesterday's big sell-off, is on track to lose its FTSE 250 status, despite rising around five per cent today.

Any main market listed company ranked 90 or higher by market capitalisation is automatically given a spot in the FTSE 100 on reshuffle day. Firms will be automatically relegated if they rank 111 or lower and are currently listed on the blue chip index as at the last ranking point.

The fortunes of those between 91 and 110 inclusive will depend on any newly floated companies, which, if big enough, can oust those at the bottom of the pile. For the FTSE 250, the corresponding ranking is between 326 and 375.

Read more: Woodford suffers a £1bn blow

Woodford

After suffering more than £1bn of losses in the first five and a half weeks of 2018 alone, star fund manager Neil Woodford's investment trust is teetering on the edge of being stripped of its FTSE 250 status. Woodford Patient Capital is in 366th place. While not enough to to be relegated automatically, a five per cent fall from Monday's prices could put it in the danger zone.

Meanwhile, small cap listed investment trusts such as Baillie Gifford Japan Trust and Edinburgh Dragon Trust have overtaken Woodford in the rankings and could yet replace the acclaimed money manager in the UK's mid-cap index.

Read more: Royal Mail boss should not shun the limelight

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