Business

Investing in the oldest company on the London Stock Exchange

Traded as LSE: RMG

As of 2021, the oldest company traded on the London Stock Exchange is the Royal Mail. The company traces its roots back to 1516, when King Henry VII established the Master of Posts position. King James VI established the royal postal service in 1603, and the company was made available to the public as the Royal Mail by King Charles I in 1635.

The history of the Royal Mail on the London Stock Exchange is much shorter, as it wasn´t listed here until 2013. The share price rose by 38% on the first day of conditional trading, leading to accusations of undervaluation. Six months later, the trading price was 58% more than the sale price.

The British government raised a total of £3.3 billion from the full privatisation of the Royal Mail.

If you are investing in the UK want to trade in LSE:RMG there are many online brokers and platforms to chose among. It doesn´t have to be a platform based in the United Kingdom, since plenty of brokers and platforms worldwide include Royal Mail stocks in their offering. Many of these platforms are filled with nifty tools for technical analysis, and you can take advantage of modern services such as automated copy trading.

Trading In The Mail

The Royal Mail was government-owned until 2013 when most of its shares were listed on the London Stock Exchange. The government initially kept 30% equity, but divested themselved of that stake in 2015.

The Royal Mail IPO was set at 330p, and the share price immediately rose sharply at the very first day of conditional trading, promting accusations of undervaluation.

Recent Trading In The Royal Mail

Throughout 2019 and for most of 2020, Royal Mail shares were trading below the issue price, but this changed in December 2020 when the price climbed back up over 330p again. Since then, things have been looking very good, and during the second half of March 2021, Royal Mail has been trading above 500p.

The Royal Mail Becomes A Publicly Traded Company

Background

  • The Royal Mail lost its 350-year British postal market monopoly on 1 January 2006.
  • In 2008, the British government commissioned and independent review of the postal services sector by Richard Hooper CBE. The findings led to an attempt at part privatization of the company, but after the required legislation passing the House of Lords it was abandoned in the House of Commons.
  • Following the 2010 general election, Hooper was asked to expand on his review to account for EU Directive 2008/6/EC which called for the postal sector to be fully open to competition by the end of 2012.
  • The government passed the Postal Service Act 2011 which allowed for up to 90% of the Royal Mail to be privatised, with a minimum of 10% of shares to be held by Royal Mail employees. The Act was granted Royal Assent on 13 June 2011 and the majority of its provisions came into force on 1 October that same year.

The Royal Mail Is Listed On The London Stock Exchange

In July 2013, it was announced that Royal Mail was to be floated on the LSE and that postal employees would be entitled to receive free shares.

In September 2013, the Communication Workers Union (CWU) stated that 96% of Royal Mail employees  opposed to the privatisation.

The IPO was set at 330p and conditional trading commenced on 11 October 2013. On the first day of conditional trading, the share price rose by 38 percent.

On 13 October, the CWU confirmed that the privatisation would be met with strike actions.

The full listing took place on 15 October 2013.

After The Ipo

Following the IPO, 52.2 percent of Royal Mail had been sold to investors and 10 percent had been given away for free to Royal Mail employees.

No Strike

The CWU called of strike action on 30 October 2013.

Over-Allotment Arrangement

Since the demand for shares in the Royal Mail was so high, an additional 7.8 percent of the company was sold via an over-allotment arrangement on 8 November 2013. After this, the government still held a 30% stake in the company.

How Much Money Did The Sale Of Royal Mail Shares Raise?

Loking at the combined figures for the October and November sales, a total of £1.98 billion had been raised.

Accusations Of Undervaluation

On the first day of conditional trading, the share price rose by 38 percent, which prompted accusations of undervaluation. Six months later, the current price was 58 percent more than the sale price.

Following questioning from the House of Commons Business Committee in April 2014, Business Secretary Vince Cable denied the accusations of undervaluation, saying that the threat of strike action had impacted the valuation.

The Government Sells Its Remaining Stake In Royal Mail

The government sold its remaining 30 percent stake in Royal Mail in 2015.

  • Half of the government´s remaining stake was sold to investors on 11 June, bringing in £750 million. At the same time, 1 percent was passed to Royal Mail employees.
  • On 12 October, another percent was passed to Roayl Mail employees, and the rest of the government´s remaining stake in the Royal Mail was sold to investors for £591 million.
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