Royal Mail sets IPO price range

The UK government has confirmed that Royal Mail will float on the stock exchange next month.

If our Royal Mail grey market is any indication, it seems likely that many investors will be eager to take up an allocation in the float. Our client-led trading has seen the inferred valuation of the company reach £3 billion, as the vast majority of clients have gone long on its market capitalisation at the end of the first trading day.

The government has said that shares will be sold in a range between 260p and 330p, giving the company a market capitalisation of between £2.6 to £3.3 billion. This would put the company on the cusp of the FTSE 100.

As a general rule when a company floats, the lead broker will try to ensure that the price offered leaves room for added value to be attributed by the market, and that institutions are left needing to top up their allocation after it has started to trade. Although this is always a little tricky to ensure, the fact that in less than a year there will be a guaranteed dividend attached to the stock will, in this income-tough environment, give the stock appeal.

The worries that some will have are probably twofold; firstly the fact that Royal Mail will have to maintain a postal delivery service throughout the UK at a standard cost – an area of the business that is arguably more of a hindrance than an asset. The second concern is the likely battles it will have with the trade unions, which have a solid grip of the workforce.

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.

Find articles by analysts