Royal Mail shares to be sold online as part of first internet-era privatisation

VINCE Cable revealed yesterday that retail investors will get the chance to buy shares in Royal Mail through a new government website, as part of plans to float the state’s majority stake in the postal service on the stock market.

In the first major privatisation since the internet has been in widespread use, the business secretary said members of the public will be able to buy into the £3bn initial public offering (IPO), with an allocation of shares set aside for purchase by individuals.

Interested investors will be able to buy the shares directly via a government-hosted website, with a joint venture between Barclays and Solid Solutions likely to manage the offering behind the scenes.

The move is an ironic twist for a firm which has seen its letters business decimated by the internet and email.

Although no decision has been made on the size of the allocation, sources suggested at least a fifth of the shares in the 497-year-old business are likely to go to retail investors.

Unlike the major privatisations of the 1980s there will be limited advertising and shares will not be sold at a discount to the public. Despite this, the government’s decision to sell shares directly to individuals, rather than exclusively relying on brokers, has raised questions about how forthcoming privatisations will be handled.

“For a big seller such as the government to have its own website is unusual,” said Richard Hunter of Hargreaves Lansdown. “This could be a template for future spin-offs, an experiment to see whether they could use it again for the likes of the RBS and Lloyds sales.”

The Communication Workers Union (CWU) yesterday repeated its threat of rolling strikes if the Royal Mail sale goes ahead, despite Cable confirming that UK staff will receive 10 per cent of the company’s stock for free.

With 150,000 employees in Britain this could amount to a one-off £2,000 payment for every Royal Mail worker, although staff will have to wait three years before selling their shares. Staff will also have priority status if they want to invest in the retail offering.

In an attempt to defuse union opposition, Royal Mail has offered a legal commitment that would see wages rise 8.6 per cent by 2015 and commit the company to no compulsory redundancies during the same period.

Business minister Michael Fallon, who is handling the sale, told City A.M. that workers “have nothing to fear and everything to gain” from the forthcoming flotation.

“Autumn is the first opportunity this financial year but if the markets don’t allow it or if profitability turns down we have the second half of the financial year to consider a transaction,” he added. Fallon also said he hopes the ownership will be as diverse as possible and batted aside concerns that foreign investors would buy up shares. The government is expected to sell just over half of Royal Mail’s shares in the first batch.