Is It Is Good Idea To Buy Royal Mail Shares?

Stargazer | 12:56 Mon 07th Oct 2013 | ChatterBank

23 Answers

The offer ends tomorrow and I have not had time to study this deal. In the past I did buy and sell electricity shares and made a small amount of money. I am not greedy (just careful to make money when given the opportunity). I live entirely on a Government Pension with no additional private pension, so do live on a tight budget. I would be investing a large part of my savings to do this but want to know if iit is worth it.

Ironic

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Prudie

Well there's always a risk and nothing is guaranteed . From what I heard on the news the sale will be heavily oversubscribed and the ordinary person will be last on the list for allocation so there's no guarantee you'll get any even if you want to. The general view is they will go up in value shortly after sale, I think the minimum spend is £750.

LazyGun

Based upon previous flotations of publically owned companies and the way their shares rapidly gained in value, and also based upon the sense that the Royal Mail has been both undervalued and the issue heavily oversubscribed, all the indications suggest that the price should rise.

But of course past performance is no guarantee :)

All the indications would suggest that you would be very unlikely to lose money, assuming you are assigned shares - as Prudie says, heavily oversubscribed so getting shares at all is something of a lottery

jno

as LazyGun says, there has been a tendency to underprice these sell-offs a bit (possibly to lure the public into buying something they already own), so there's a good chance of a short-term gain.

But that's not a promise so don't quote me.

Zacs-Master

I think it may take quite a few years for the post office to turn itself around, so I don't think you will get a fast return on any investment.

Gromit

Zac

Any rise in the share price isn't really dependent on future profits. Usually, small investors are in it for the short term and will dispose of their shares within a few months. That is why all the utilities which we previously all owned are now French and German owned.

LazyGun

We must be looking at different companies, Zac. Its the Royal Mail that is being sold off - a company now profitable, since its bad debts and problem pension plan have now been assumed by the Treasury.

The Post Office side of the mail business is separate from the Royal Mail and does indeed run at a loss.

All the indicators suggest that the share value will rise markedly and fairly rapidly, and that those who buy their shares can start trading in them immediately - no lock in period.

Interesting piece in the Guardian on the IPO:
http://www.theguardian.com/uk-news/2013/oct/07/royal-mail-ipo-shares-floatation

Zacs-Master

Lazy, I meant the RM. Apologies for any confusion. As for the quick return, I remain to be convinced.

LazyGun

@ Zac - Fair enough ;) As an effective part owner, watching the assets being undervalued and in many cases sold back to people who already own the asset, I await the results of the flotation with some interest and no little cynicism. I shall not be investing, but not because I feel the shares may not perform; More because I oppose the flotation in principle.

How about a small wager? A virtual pint on the share performance? I reckon share price will rise markedly from the notional offer price in the days and weeks following the flotation.

Zacs-Master

OK, You're on ;-) I think 'rise markedly' needs defining. Are you saying it will double inside a month / a year ?

LazyGun

@Zac - you are right; "markedly" is a bit vague. Not quite sure I would want to commit myself to the notion that the share price would actually double though. IPO share price offering is in the band £2.60- £3.30 and I reckon a rise to around £4.20 or so is do-able within say 6 months, which would represent around a 30-60% gain; An excellent return compared to the performance of the FTSE 100, wouldn't you say? :)

Zacs-Master

Ahhhhh. Cluck cluck.
'All the indicators suggest that the share value will rise markedly'
30% is hardly markedly.
C'mon pin your colours to the mast. I'd say it will rise 30% max in the first year. There.

EDDIE51

The Financial Times today says there will be an instant profit as it has been well under valued. £750 is the minimum investment. No good to me I would struggle to find £7.50! There is likely to be a lottery for shares as it is oversubscribed, already.

LazyGun

Considered against the yardstick measurement of performance by the FTSE 100, I would say 30% over 6 months is "markedly", but no matter :)

OK, I will go with reaching a price of £.4.90 within the first year, which would represent a return of somewhere between 50 - 80 odd %, depending on the exact offer price.

Zacs-Master

Super. Now i must rush, I have some shares to buy :-)

237SJ

You usually find that new issues rise quite quickly as soon as trading starts then drop back to a level that they settle at. You also find that they are so oversubscribed that you end up with only a couple of hundered quid`s worth in the end. Probably worth it if you want a flutter and can spare the cash.
I remember when my flatmate was working for a company that was privatised and the general public could only get a very limited amount of shares. The employees though, could get £30,000 worth. She went home to Ireland and on the flight, she sat next to a man who offered to put up the £30,000 if he could use here entitlement so that`s what they did. They made £11,000 overnight and split the proceeds 50/50.

SIRandyraven

Put in £6,000 bid to buy shares. Doubt if I will get full allotment of shares.
Worth a punt I feel. Did well on all the previous privatisations. Made thousands on the power distribution company floatations. That was a free for all.

SIRandyraven

Even a 10% gain is better than keeping money in the bank at the moment.

LazyGun