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Royal Mail Delivers a Hot IPO

NEW YORK ( TheStreet) --There was a legitimately hot initial public offering in the United Kingdom today when the Royal Mail listed its shares on what turned out to be an accelerated timetable. We've followed this story over the last couple of months as it moved from controversial possibility some time in 2014 to today's start of trading on a limited basis for institutions.

The controversy focused on two issues and there may be a third issue now that trading has begun. The first controversy focused on employees' concerns over job safety and reductions in benefits. Part of the logic of doing an IPO was and is to try to make the company more efficient. All mail services face challenges from the Internet in terms of email replacing letters, Web sites replacing magazines and online banking replacing the sending out of monthly bills and the mailing back of payments.

Threats of obsolescence are a serious threat to post offices. In the last 10 years, parcel volume for Royal Mail is down 25% although it is up in the last year. The company has begun to implement new technology to make things like sorting at the company's facilities more efficient, so job security is a legitimate concern. Management is aware of this and has made efforts to allay this fear by giving employees a 10% stake amounting to about 2,200 British pounds worth of shares per employee to instill a sense of ownership among the rank and file.

Another concern has been about the "universal service obligation" to maintain the same delivery standards. The U.S. Postal Service has toyed with the idea of eliminating Saturday delivery to save money, so another post office could also consider such a move which is a concern for Royal Mail customers.

The offering was oversubscribed; more demand for shares than available supply. The IPO was priced at 330 pence but reports have it trading between 430 pence and 450 pence. The UK ticker symbol for Royal Mail is RMG but trading today is restricted to institutions so quotes are not widely disseminated through normal quote vendors. Regular way trading and quoting is scheduled to begin on Tuesday of next week.
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