Royal Mail PLC Rises Over 35% On Market Entry

Welcome to the stock market, Royal Mail (LSE: RMG)!

Well, almost. City institutions began conditional dealings this morning, with the shares set to be officially listed on 15 October.

The shares in the postal service opened at 450p, having been initially priced by the government at 330p — leading to a 38%+ increase as the shares hit 456p in early trade.

Indeed, within the first 30 seconds of the market opening, 10 million Royal Mail shares were traded, and in its first hour on the London Stock Exchange saw 102 million shares — 10% of the whole issue — traded, as shareholders who bought in at the minimum £750 (each receiving 227 shares) saw instant returns of over £260.

The sharp rise has caused some market pundits to question whether the shares were sold too cheaply. Speaking to BBC Radio 4’s Today programme, Business Secretary Vince Cable stated: “The objective of the exercise, which fits in with what we want for the Royal Mail, is to make sure it has stable, long-term investors.”

And that’s what we preach here at the Fool — don’t trade, invest for the long term instead. Potential strike action at the end of October may have a small impact on Royal Mail’s share price, but those of us who opted into the privitisation ought to have considered that aspect before deciding to purchase shares.

It may be that the shares fall back to their offer price over the next few months. But with a yield of around 6% attracting income investors, in these early days I doubt many Fools will be cashing in to make a fast buck, knowing that shares held for a long time are like to win out eventually.

After all -- it's a marathon, not a sprint. And if you're looking to complement your Royal Mail holding with a solid 5% yield in a company that could still prosper if the economy turns for the worse, as well as deliver a healthy gain if sentiment suddenly improves, then you need to read our brand-new special report.

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> Sam owns shares in Royal Mail.