Royal Mail Shares Enter FTSE 100

Royal Mail shares have entered the FTSE 100 after months of the stock's price soaring higher and higher.

The communications firm, privatised by the UK government in October in a controversial flotation onto the London Stock Exchange, was worth around £6bn on 23 December.

When it landed in the FTSE 100, Royal Mail's share price was more than 80% above the government's 330p offer price in the initial public offering. It fell back slightly after.

Sunny Dhanjal, senior trader at Accendo Markets, said Royal Mail's "life in the big league has been fairly muted (down 1.5% currently) which could be the result of profit taking ahead of the Christmas break."

The FTSE 100 is the index for the 100 most valuable firms trading on the London Stock Exchange.

Goldman Sachs, the US investment bank which helped advised the government on its offer price, has a 610p 12-month target price for Royal Mail. UBS, which also advised the government, set a 450p offer price.

Both banks as well as the two ministers handling Royal Mail's sell off – Business Secretary Vince Cable and Enterprise Minister Michael Fallon – have faced criticism for allegedly undervaluing the firm and costing taxpayers hundreds of millions of pounds in potential revenue.

All say they were following the advice of institutional investors being targeted in the IPO and who warned they would walk away at any offer price above 330p.

They also blamed an industrial relations dispute with the Communication Workers Union (CWU) hanging over the firm for weighing on the offer price.

However, the CWU and Royal Mail have since agreed on a pay and working conditions deal. It sees Royal Mail workers given a 9% pay rise spread over three years as well as a £200 Christmas bonus in 2013.

There are also a number of legally-binding agreements, such as no part of the business being sold off in the coming years.