Royal Mail has been a spectacular stock market performer since its flotation in October, but its debut in the FTSE 100 yesterday was an excuse for investors to cash in some of their gains.
Its shares closed down 10p at 580p, the biggest faller in the leading index. But they are still well above the 330p price set by the government when it sold 60% of the company in an initial public offering, albeit below the peak of 607p reached earlier this month.
The flotation's success led to accusations the government had sold the shares too cheaply, with business secretary Vince Cable and City advisers called before MPs to defend their decision.
Cable was criticised for describing the initial share price reaction – when it surged 38% on the first day – as "froth" and declaring the shares would take months to find their true level.
He also said any last minute increase in the sale would have put off the long-term investors the government wanted to attract. But critics pointed out that much of the early buying came from hedge funds such as the activist investor TCI, rather than the more conservative funds that Cable had in mind.
Many analysts believed the flotation undervalued the company's property assets, which could be off-loaded or sold and leased back.
City law firm Clifford Chance is analysing the company's portfolio of 2,000 UK properties. But chief executive Moya Greene was dismissive of the idea the company could make huge gains from the sites. She said: "People are probably running away a bit with themselves.
They are looking at development, with pound signs in their eyes, that we would be a bit surprised by." Since the early days of the flotation, the shares have traded consistently above 500p.
In its first results following the share sale, announced at the end of last month, Royal Mail reported nearly doubled half year profits of £283m, helped by rising parcel revenues, cost cutting as well as a one-off VAT credit of £35m.
Meanwhile, one of the factors that was seen as a possible negative for the flotation was resolved earlier this month when a three-year pay deal with unions averted the threat of strike action.
The Communication Workers Union had warned of industrial action over the busy Christmas period, but both sides agreed a 9.1% pay rise and a £200 lump sum payment on 10 December, pushing the company's shares to their highest level so far.
Despite yesterday's blip, most analysts expect the shares to move higher. In a recent note Espirito Santo set a price target of 635p, but said that could be underestimation given the prospect of stronger UK economic growth boosting the business, as well as increased benefits from its efficiency drive.
Analysts at Goldman Sachs, one of the banks advising the government on the flotation, have set a value of 610p on the shares.
Meanwhile Ashtead, the industrial group, also joined the FTSE 100 yesterday and also saw profit taking, with its shares closing 9p lower at 764.5p, the second biggest faller in the index.
theguardian.com
Its shares closed down 10p at 580p, the biggest faller in the leading index. But they are still well above the 330p price set by the government when it sold 60% of the company in an initial public offering, albeit below the peak of 607p reached earlier this month.
The flotation's success led to accusations the government had sold the shares too cheaply, with business secretary Vince Cable and City advisers called before MPs to defend their decision.
Cable was criticised for describing the initial share price reaction – when it surged 38% on the first day – as "froth" and declaring the shares would take months to find their true level.
He also said any last minute increase in the sale would have put off the long-term investors the government wanted to attract. But critics pointed out that much of the early buying came from hedge funds such as the activist investor TCI, rather than the more conservative funds that Cable had in mind.
Many analysts believed the flotation undervalued the company's property assets, which could be off-loaded or sold and leased back.
City law firm Clifford Chance is analysing the company's portfolio of 2,000 UK properties. But chief executive Moya Greene was dismissive of the idea the company could make huge gains from the sites. She said: "People are probably running away a bit with themselves.
They are looking at development, with pound signs in their eyes, that we would be a bit surprised by." Since the early days of the flotation, the shares have traded consistently above 500p.
In its first results following the share sale, announced at the end of last month, Royal Mail reported nearly doubled half year profits of £283m, helped by rising parcel revenues, cost cutting as well as a one-off VAT credit of £35m.
Meanwhile, one of the factors that was seen as a possible negative for the flotation was resolved earlier this month when a three-year pay deal with unions averted the threat of strike action.
The Communication Workers Union had warned of industrial action over the busy Christmas period, but both sides agreed a 9.1% pay rise and a £200 lump sum payment on 10 December, pushing the company's shares to their highest level so far.
Despite yesterday's blip, most analysts expect the shares to move higher. In a recent note Espirito Santo set a price target of 635p, but said that could be underestimation given the prospect of stronger UK economic growth boosting the business, as well as increased benefits from its efficiency drive.
Analysts at Goldman Sachs, one of the banks advising the government on the flotation, have set a value of 610p on the shares.
Meanwhile Ashtead, the industrial group, also joined the FTSE 100 yesterday and also saw profit taking, with its shares closing 9p lower at 764.5p, the second biggest faller in the index.
theguardian.com
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