Royal Mail Shares Soar Near 80% from IPO Price

Royal Mail shares have soared by nearly 80% above the delivery service's initial public offering price which will undoubtedly ladle on fresh embarrassment for the UK's business secretary after he launched the stock at 330p.

Royal Mail's stock price hit 589.33p as of 1225 GMT on the London Stock Exchange which values the group at around £5.3bn ($8.5bn, €6.2bn).

The soaring share price massively exceeds analysts' estimates from 25 October that the stock could rise by over 70% within the next 12 months.

According to a research note by Panmure Gordon analyst, Gert Zonneveld, the stock was tipped to rise to 570p from its IPO price of 330p.

However, today's share price rise has blown this estimate out of the water.

Goldman Sachs and UBS, which assisted the government in the sale of Royal Mail shares, recommended an offer price of 330p last month.

Since the stock began trading on 11 October Royal Mail's share price has rocketed, leading to criticism that the government undervalued the firm and cost taxpayers hundreds of millions of pounds in potential revenue.

Cable has written to MPs defending the price at which Royal Mail shares were sold off.

"Delivering value for money is about more than just the level of proceeds received on day one," wrote Cable to parliament's business select committee.

"Our long-term strategy to safeguard the universal service and deliver value for money for the taxpayer involves not only getting good value for the initial stake sold but also getting good value for the residual stake held by government (30% of the Company assuming exercising in full the Over-allotment Option), and leaving Royal Mail in a strong, sustainable position capable of accessing the capital markets in the future."

Cable appeared in front of the committee on 9 October and is due up again this month.