Royal Mail shares surge on market debut

Shares in Royal Mail rose by more than a third when they began trading on the stock market this morning, increasing the value of the business by more than £1 billion.

The sharp rise of 36 per cent from the 330p offer price to as much as 450p meant 690,000 ordinary investors who have each bought around £750-worth of stock gained more than £270 each.

The UK government announced yesterday that 95 per cent of all applicants for the heavily-oversubscribed offer had picked up stock.

However, thousands of would-be private investors were left disappointed when their requests for more than £10,000 worth of shares each were turned down.

Shares in the delivery services were priced at 330p, the maximum level set in the offer range, initially valuing the business at £3.3bn. At 450p, the group has a market capitalisation of £4.5bn.

The sharp increase in value will fuel the debate over whether the sale was priced too cheaply, following criticism from the Labour party that the government was short-changing taxpayers.

Royal Mail’s initial public offering leaves the government with a 38 per cent stake, but this could reduce to 30 per cent if it exercises an over-allotment option.