Royal Mail set to float

The UK government has announced its plans to privatise Royal Mail in the next few weeks.

When the state-owned postal delivery company is transferred to a public-listed company quoted on the London Stock Exchange, employees of Royal Mail will be offered 10% of the shares of the company, with the remainder offered to the public and institutional investors such as pension funds.

The government’s decision to sell Royal Mail stems from the cash incentive which will follow, as the funds raised from the flotation will go in the exchequer, which will boost the country’s balance sheet. Under the current system, Royal Mail borrows money from the government at a rate of 8.8% – the cost of borrowing is likely to drop after the flotation.

The initial public offering date has not been set yet, but it is believed that it will be in the coming weeks. Some economists believe that its market capitalisation will be in the £3 billion region.

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