We explain the key points on the Government's controversial allocation of Royal Mail shares, how trading will begin and much more.
Small investors have been favoured over large in the privatisation of the Royal Mail. Savers who applied for up to £10,000 worth of shares in Royal Mail have ended up with fewer shares than they wanted.
Each member of the public, around 690,000 people, will receive £750.
But, in a surprise move, those who asked for more than £10,000 - around 5pc of the total - will receive nothing.
Unprecedented levels of demand - the allocation for individual investors was oversubcribed seven times over - was blamed.
It was feared a large percentage of its shares will end up with short-term investors such as overseas institutions and hedge funds, which would result in some small investors not getting any shares. However, 95pc of application will receive shares. Anyone who applied for the minimum amount of £750 will receive the full amount
In total over 270,000 applicants will receive at least half of the shares they have applied for.
Royal Mail employees who applied for shares via the Employee Priority Offer will have their applications met up to £10,000.
Grey markets - spread betting markets run by IG Index where punters bet on share prices - are indicating that Royal Mail shares will rise to around 400p on the first days trading. That will give retail investors holding the minimum stake £158 in paper profits on day one, and value Royal Mail at £4bn.
Based on the minimum allocation of £750 per person, and the indicative full-year dividend of 20p, investors would receive £45 a year in dividend income if they retained their stake.
Key points about Royal Mail float
• Under the terms of the float, City institutions were guaranteed to receive 70pc of the share issue and small investors 30pc.
• The institutional offer was more than 20 times subscribed and the retail offer was approximately seven times subscribed.
• The shares will start trading on markets on Friday with one billion shares in issue at a starting price of 330p, valuing the group at £3.3bn.
Key questions and answers
How has the allocation been made?
Everyone who applied for less than £10,000-worth will get the same - 227 shares worth £749.10. It means 385,000 investors had their allocation scaled back. More controversially, the 34,500 investors who pitched in for more than £10,000-worth will get nothing. Those investors represent around 5pc of the 690,000 total who applied.
Why were those investors excluded?
The Government thought that leaving those wealthy enough to invest more than £10,000 would be least bothered about missing out on a small alllocation of shares. The decision, critics suggested last night, enables the Government to boast that it was a "people's privatisation". Royal Mail employees, it should be noted, will get not only free shares but are guaranteed to get any extra shares they applied for, up to £10,000.
What does the City receive?
Financial institutions (NasdaqGS: FISI - news) , ranging from pension funds to hedge funds, took the lion's share with 67 per cent of the shares, leaving the rest to small investors and Royal Mail workers.
Why didn't they allocate more of this to individual investors?
The official line is that institutions are more likely to be long-term investors, creating more stability in the first few weeks. However, concerns have been raised that many of the instituionally allocated shares would end up in the hands of high-frequency traders.
When does trading begin?
"Conditional trading" begins today at 8am today with full trading starting at 8am on Tuesday. The shares will start at 330p.
What is conditional trading?
Conditional trading is a halfway house before full trading. Richard Hunter of Hargreaves Lansdown (LSE: HL.L - news) said it was an arcane legacy of the City and likened it to the gap between "exchange" and "completion" when buying a house. Any trades agreed will not be fulfilled until open market trading begins on Tuesday, he said.
Where can I find the share price tomorrow?
The company will have the ticket “RMG” and can be found at shares.telegraph.co.uk/quote/?epic=RMG
What will happen to the shares?
Grey markets - spread betting markets where speculators bet on share prices - are indicating that Royal Mail shares will rise to around 400p. A poll of more than 8,000 readers on telegraph.co.uk/investing found 41 per cent expecting the shares to finish day one at 400p. That will give investors £158 in paper profits on day one.
How much income will I receive if I hang on to the shares?
The company has promised generous dividends. Based on the price of 330p, the income paid from the shares each year should be equivalent to 6.1 per cent. Based on the minimum allocation of £750 per person, and the indicative full-year dividend of 20p, investors would receive £45 a year in dividend income. The first payment is made next summer will be smaller to reflect the shorter financial year.
And will the shares rise long-term?
The bulls say booming demand for parcel deliveries will keep Royal Mail revenues buoyant. The bears point to union trouble, new competitors and a long and steady decline in the letters business. The future share price depends on the impact of all these factors, to be able to keep paying the dividends and to be able to invest in the business and help coax the share price higher.
So if missed out, should I buy now?
The Daily Telegraph’s share-tipping Questor column urged investors to take part on the suggested initial valuation of 260p to 330p. But it warns that buying above 350p gets into the realms of irrational exuberance.
Should I sell straight away?
Investing is a serious game and decisions should be long-term. One good reason not to sell is that offer of generous income. A wise approach is to set a target price in your mind and sell at that level.
But many are treating it as a chance to make a quick buck. Even the Royal Mail’s official share dealing service encourages buyers to sell early. It is offering to sell shares at a discounted cost of £7.50, down from the usual £17.50, for a short spell. It won't say for how long.
• Investment tips every week by email sign up here