LONDON (AP) -- Shares in newly-privatized Royal Mail soared on their stock market debut Friday, likely bolstering criticism that the company, which traces its history back to King Henry VIII, was undervalued by the British government.
Two hours after the start of trading in London, Royal Mail's share price was trading 34 percent higher at 441 pence and over 125 million shares had changed hands, around 12.5 percent of the total issue. The shares were allocated to shareholders, large and small, at 330 pence.
Big financial institutions, such as pension funds and sovereign wealth funds, are trading the shares Friday in what is known as conditional trading. Smaller shareholders, including postal workers who got free shares and others who tended for only 750 pounds ($1,200) worth of shares, will get their chance to sell or boost their portfolios next Tuesday.
"One can only say that investors have clearly given their stamp of approval to the offering," said Brenda Kelly, senior market strategist at IG. "Whether this pricing can be sustained remains to be seen, and one could expect to see more clarity when the shares are listed officially next Tuesday."
The opposition Labour Party has charged that the government undervalued the company, and that taxpayers have been shortchanged.
Following Friday's early surge, the company is now valued at nearly 4.5 billion pounds ($7.2 billion), which means that it is easily in the top 100 British companies, by market capitalization. That means that it could become a constituent member of the FTSE 100 index of leading British shares when the next quarterly changes are made in December -- a development that would attract further investor interest from funds that specifically track the big indexes.
The government raised 1.72 billion pounds from the sale of a majority stake, which has put Royal Mail under private control for the first time in its 500-year history.
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