Should I Buy Royal Mail Shares

Should I Buy Royal Mail Shares?

The Government is to sell 70% of its stake in Royal Mail at an estimated sale price of £3bn.

The strike point share price is thought to be around £3, valuing the business at £3bn.

1 billion shares will be issued.

Speculators and spread betters, a good benchmark for what the future price of any market or share may be as they 'gamble' on share prices, puts the top end at £3.40 per share.

What does this mean?

It means that if flotation does launch at £3 per share, if spread betters are right, and they usually are, you could see an initial jump in Royal Mail shares of 40p.  This is a real return overnight of 13.33%.

That sort of return is not to be sniffed at.  Some bets are calling the trade range down though at £2.60 (again a fall of 13.33%).  So investing directly in shares is not for the feint of heart.

If the Government decides not to sell at £3bn next week but sell at say £3.4bn, then the share price would initially then launch at £3.40 and you would not have the potential for the above returns where spread betters are calling the price at £3.40 anyway.

Tuesday 8th October - Closing date: Subscription is open now and closes 8th

Friday 11th October - Flotation day (Royal Mail is now a public limited company on this day)

Minimum Subscription £750.

Buy Online https://www.gov.uk/royalmailshares

Comment

Royal Mail has a virtual monopoly of logistics distribution and postal services in the UK.

It needs the ability as a free trading public company, rather than government owned, to be able to raise capital to expand and modernise its services.

It is a huge land and property owner in the UK.

Its massive pension liabilities are no longer its problem and underwritten by Government.

Royal Mail could become a FTSE 100 company, and at least a FTSE 250 company.  This will mean that billions of pounds inside institutional pension and investment stockmarket tracker funds will have to subscribe for Royal Mail Shares. 

Institutional investors have already oversubscribed applications in for Royal Mail Shares at the time of writing.

We are not stockbrokers but when large public sector operations have been sold off, share prices have rocketed with demand as the market rebalances to take account of the entry of a new company, but when market demand stabilises, prices then fall back to a traditional trading range within their sector.

So should you buy Royal Mail Shares?  The answer is yes, if you like investment risk.