Should you invest in Royal Mail? What you need to know before you buy shares
Not even Margaret Thatcher dared put Royal Mail on the block. But with its pension liabilities handed to the taxpayer and its profits primped for privatisation, investing in Royal Mail might pay off.
But you're also investing in a company that faces huge competition. And a big swathe of its workforce - plus unions - remain unhappy about the changes. Should you invest?
Make a packet?There is plenty of privatisation successful form: BT, British Gas, BA (don't mention the disastrous Railtrack adventure). Giving a personal view, IFA Jonathan Davies from Davies Keig says it's too early to know. "We'll find out in the next five weeks. However, I can't see it [Royal Mail] as providing the sort of instant profits that the Tell Sid privatisation campaign did."
'Tell Sid' was the campaign that saw investors snap up shares in British Gas back in 1986 - around 1.5m did so in the first week. And very profitably. British Gas shares have (today's price) soared to 1,207 pence. Many, many times its original selling point (though BG investors are now split between Centrica, BG Group and National Grid).
How cheap?Jon Horton from investment adviser Chamberlain de Broe shares Davies' uncertainty. "Until the financials are published," he told AOL Money, "it's a tricky one to call. Historically the vast majority of privatisations have been great successes; even with the ones who didn't turn out so well, like Railtrack have had opportunity to make money."
Could Royal Mail shares be sold on the cheap? Horton thinks not - but they won't be too pricey either. "I cannot believe they [the Government] will get full value because the worst thing politically that it [Royal Mail] could be sold still with some stock left."
He warns that while the Government offload Royal Mail onto the public, Royal Mail could be on strike at the time. "You do have a fairly militant workforce."
£750 investmentWhile Royal Mail staff will receive 10 shares of the stock, the public will need to make a minimum investment of £750. Bear in mind the claimed need by the Government to sell off Royal Mail is to force it to stand on its feet. It's not to encourage small private investors to buy into the wider privatisation model.
However, the privatisation of utilities is now taken for granted. A newly privatised Royal Mail will still, it's claimed, offer "affordable" prices (though there's a time limit of 10 years on that particular promise).
Labour oppositionLabour opposes the Royal Mail privatisation. Would Labour reverse the sale, if returned to Government? The Labour press office claimed, when contacted, they wouldn't rule it in or out (so no, probably).
"This is taking place," Labour said in a statement, "despite opposition from a huge coalition including the Conservative Bow Group, the Countryside Alliance, the National Federation of Subpostmasters, the cross party BIS Select Committee as well as Royal Mail employees themselves."