- Michael Fallon assured people they would not get ripped off
- Small investors worry they will be overlooked in the Royal Mail flotation
- The 378-year-old organisation is due to be sold off on Friday
By Becky Barrow
Small investors who want to buy shares in the controversial flotation of Royal Mail will 'get their fair share', the business minister claimed yesterday.
Michael Fallon's remarks come amid fears that smaller buyers will be sidelined by City banks and hedge funds, which will eat up 70 per cent of the shares being sold, leaving private investors with the crumbs.
But Mr Fallon promised private investors, who are allowed to subscribe for a minimum of 750 of shares, will not be ripped off by the privatisation of the 378-year-old State-owned giant.
Flotation: Royal Mail will make its market debut on October 11
They will get 'around 30 per cent' of the shares being sold, although it has not been decided how many everybody who has applied will get.
He said: 'We opened the offer up to the public so that they could have a chance to own shares in Royal Mail and have indicated that around 30 per cent of shares will go to them.
'No decisions have been taken on allocation but I'm committed to making sure smaller investors get their fair share.'
Last night, stockbrokers dealing with applications from the public said they are witnessing a stampede of people keen to buy shares before tonight's deadline.
Chris Stevenson, vice-president of Barclays Stockbrokers one of 60 brokers allowed to handle applications from private investors said: 'There is a sense of ownership. They want to retain a sense of ownership in Royal Mail.'
The flotation has received 'six times' more applications than Direct Line last year. And the 'vast majority' of buyers are asking for more than the minimum of 750 of shares, he said.
Last night, the Department for Business said it will be decided in the next few days how the shares will be divided between private investors. One option is for everybody to be given 750 of shares.
Those who applied for more than this amount might be given a percentage of the extra amount. For example, if they wanted 5,000 of shares, then they could get their 750 allocation as well as a certain percentage of the remaining 4,250 that they applied for.
The Government is selling up to 522million shares in the business, equal to 52.2 per cent of the firm. The shares will be priced between 2.60 and 3.30 each.
'Short-changed': Labour business spokesman Chuka Umunna said the shares were being offered at too low a price
Labour's business spokesman Chuka Umunna believes the company is being sold at a cheap price and that taxpayers are being 'considerably short-changed'.
But last night Business Secretary Vince Cable accused Mr Umunna of being 'irresponsible,' adding: 'I think you should consider the risk that you may be influencing retail investors.
'It is dangerous to imply there is an easy bargain to be made.'
Billy Hayes, general secretary of the Communication Workers Union, said: 'It is no surprise that the Government has sold the postal service cheap to its friends in the City. The public will get a worse service as customers. Now they also know they are getting a bad deal as taxpayers.'