Successful applicants in the controversial privatisation of Royal Mail must now decide whether to hold on to the shares for future dividends, or sell for an instant profit.
The offer was massively oversubscribed and applications have been dramatically scaled back. Anyone who applied for up to £10,000 worth of shares will receive an allocation of 227 shares, worth £749.10 at the initial 330p price. But anyone who applied for more than £10,000 worth of shares will get nothing.
Trading started on Friday and some private investors have already sold their shares. However, some will be unable to do so until Tuesday 15 October.
If you applied at gov.uk/royalmailshares you cannot deal in the shares until you have received your formal share account statement.
If you bought through the paper application forms made available at the Post Office, the governments intention is that you will hear by 21 October. Again, you cannot trade the shares until you have been notified of the allocation.
So what happens then? The shares bought through the gov.uk site will be held in the Royal Mail Nominee Share Service, and the government has appointed Equiniti to offer a dealing service.
Longer-term investors can hold their shares with Equiniti, and receive dividends into their account that way. If they wish to sell, the current standard dealing charges are 1% of the value of the transaction, subject to a minimum charge of £17.50 (if dealing online), or £25 (if dealing by telephone, at 0845 268 0282).
But the cheapest way to sell for most small shareholders with just the minimum allocation will be through a temporary telephone and postal dealing services, again run by Equiniti, where the charge will be 0.75% of the value of the transaction, subject to a minimum charge of £7.50. Full details of these services will be sent to successful applicants after the offer. It is understood that this temporary low-cost dealing option will remain open until early November.
People who bought through the Post Office can also sell their shares through a postal instruction, using the dealing form that will come with the confirmation of allocation. The cost will be 0.75% of the transaction, again subject to a minimum charge of £7.50.
Since every small investor will have just £750 worth of shares, the dealing cost in the first few weeks will in effect be £7.50. Given the expected rise in the share price to around 400p in early dealing, investors who sell out next Tuesday can expect to make an instant profit of around £180-£185. But those who hold on to their shares can expect to receive a dividend worth around £45 a year, rising year by year.
The sell-off is likely to be less of a bonanza for the retail stockbrokers than they hoped. Many were lining up deals to attract small investors to switch from Equiniti and transact through them, but this makes little sense given the small sums involved. Online sites allow traders to deal in shares for as little as £5.95 a trade, but effecting a switch can take as long as two weeks, and comes with a charge of £10, which means it is hardly worthwhile.
If you are allocated shares you will be sent a statement confirming the number of shares held for you and a full information pack. You will also get all of the benefits received by Royal Mail shareholders, such as the right to vote at the annual general meeting.
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