Royal Mail Shares

Jevvers

Do you have to sell the whole lot if you trade at floatation? I was considering selling half and holding half (although that made a bit more sense re the £2.5k I applied for... !).

Thank you everyone who has contributed to this thread btw, much better info than anywhere else!

Klambo

Jevvers wrote: »

Do you have to sell the whole lot if you trade at floatation? I was considering selling half and holding half (although that made a bit more sense re the £2.5k I applied for... !).

Thank you everyone who has contributed to this thread btw, much better info than anywhere else!

You should be able trade however many shares you like.

badger09

No - you can sell as many or as few shares as you wish - up to 227:) But the set dealing fee will obviously have a bigger impact if you sell only say, 10 shares

jimjames

Rheumatoid wrote: »

As others have said be careful. Individual stocks are a risky business and I got out of them when the risks to my retirement pot were too high. RMG was worth a punt but I shall be putting any gains back in funds which spread the risk.

I hope it hasn't given a false sense of share investing to a lot of people who could get burned. Expecting to make 30% on a day's trading isn't typical and isn't what long term investing is all about.

spock007

lulu650 wrote: »

It's good fun and I dipped my toe in after receiving BOGOF shares as a BP employee. After doing research I bought into a building firm, Tilbury, in the early 80s. Knew I was onto a good thing when the stockbroking firm rung me up to ask me to sell them.

However, I have lost money on technology shares. Got in far too late and should have sold much more quickly then I did. You do need to keep a very close eye on the movement of the share price and general trends.

What did you do for BP? I'm an electronics engineer looking to make the switch but they're rock solid to break into. EDIT - if you read this, please pm with instead of answering on here as I'll likely forget to check this thread!

bowlhead99

aktivemac wrote: »

Fair point - I hadn't thought through the full trade dynamics and yes you are right, all things being equal you could wrap your capital gains into the equation and re-invest at a lower yield for the same outcome.

The dividend yield on the original IPO shares is still 6% though...

I see your smiley but remember 'original IPO shares' stopped existing immediately after the allocations. What you now have are shares valued at 400p+. Looking at historic prices to try to work out your potential profits in terms of gains and yield from current levels is a common mistake but a really bad habit to get into. Whether a share, fund or other asset deserves a place in your portfolio today should always be considered in the context of its potential gains or potential losses from here combined with its potential income.

So if you could get £1000 for your shares today or keep them invested in this asset producing £40 a year, then the 4% yield combined with x% potential gains and x% potential losses on the £1000 is worth thinking about, in lieu of the £1000 in cash you could have already. A notional 6% of what the shares used to cost at some point or 3% of what they might cost in the future is not relevant to anything when looking at your opportunities today.

Jevvers wrote: »

Do you have to sell the whole lot if you trade at floatation? I was considering selling half and holding half (although that made a bit more sense re the £2.5k I applied for... !)

They are yours to do what you like with, so you can sell 1 share or 226 shares if you want. Given you will incur transaction costs every time you buy or sell, and potentially some custody fees or personal time looking after the certificates depending on how you hold them over the coming years, it makes less sense to package them into small chunks and sell them off piecemeal.

A 2k or 10k holding could be split relatively efficiently, but what you hold at the moment is only worth 1k total so splitting two ways means that at least one of the halves is worth £500 or less and is relatively expensive or hassle-filled to hold or trade in the context of potential gains and income from it.

If you have a 50k investment portfolio you might be quite happy cashing in half of your £1000 RM shares and having the other half (1% of your overall portfolio) invested in RM and tucked away for a longer term view. The huge number of people dabbling in these single-company shares for the first time in their lives as a result of the hype around this IPO, are probably overexposed at even £500 and should probably take their windfall and run.

At the end of the day, the shares may go up or down in the long term. If they perform 'averagely' then they will just go up and down with everything else. Most of us are not smart enough to identify if they will perform better or worse than the average basket of shares from their current market price and would be better off with the diversity of investing in funds for a small management fee or only holding onto individual RM shares as a pretty small part of our portfolios for a bit of fun.

What was arguably more easy to predict was a froth of demand early in the IPO process giving a one-off opportunity for gains or losses until it was priced properly by the market. Fortunately that has resulted in a one off gain, within one day, several times higher than the long term average total annual return of this type of business. But from here, rather than treating some of the proceeds as 'free money', the typical investor should now bow out and make their investment returns by other methods. There's no obvious reason to keep them if you were not previously the type of person who held shares in a portfolio of blue chip companies.

spock007

Jesus, have you seen the interview with the first-time investor on BBC News sites? Cringeworthy...

Jevvers

Thanks Bowlhead, yes I generally use trackers as I prefer the passive approach. But this IPO did just seem worth a decent punt, and so it has turned out. As you say, the profit can then be reinvested elsewhere.

Although this is interesting in the tgraph:
" Looking at the share price move investors could do something called top slice. That is, bank the gains on a portion of the shares, while retaining the majority of the stake.

In practice this means selling around 57 shares, worth £250.8, at the current price of 440p. If you then deduct your dealing cost of between £7.50 to £20, that gives you cash gains of around £230.

The effect this has on your remaining holding is very interesting. Investors would now have a stake worth around £750 based on the current share price of 440p, for which they only paid £500. Having sold 57 shares of their initial 227, investors now have 170 shares remaining. Those shares should pay a dividend of 20p per share, or £35 per person, and by top slicing investors have boosted their yield from 6.1pc to almost 7pc, and banked gains."

http://www.telegraph.co.uk/finance/markets/questor/10372296/Questor-share-tip-What-to-do-with-your-Royal-Mail-shares.html

bowlhead99

It is 'interesting' but the logic is poor (at least the headline numbers they are trying to demonstrate with, have been chosen poorly). They say you both boosted your yield and banked gains - but unfortunately you can't have it both ways...

Their example was to take all the paper profits out as one transaction, receiving £230 of cash and calling it a 'cash gain'. If you are saying that all the money coming back is all gains, then you haven't got your cost back, it's still trapped in the asset. So they paid £750 for something (the 170 shares remaining), which is now worth £750. Whether you calculate the yield on the £750 it cost you or the £750 it's worth now, the £35 annual dividend is just over 4 and a half percent.

So, if you're saying the £230 coming back to you was gains not cost, you haven't "boosted yield from 6.1pc to almost 7pc, and banked gains". You have reduced yield to only three quarters of what it was (because you disposed of a quarter of the shares that would have given you the yield, while the cost is the same), and banked gains.

If you calculate the gains properly and proportionally on each of the shares, like the taxman would have you do, then you have not actually banked £230 of profit, you have disposed of 57 shares for a gain of [£230 cash proceeds after broker fees less £188 cost (57x £3.30)], = £42 gain. The rest of the paper profit is tied up in the remaining shares which cost (170x £3.30 = £561) and are worth £750 ish for an unrealised paper gain of £190 ish.

So then you can calculate a yield on what the remaining shares are worth today - just over 4 and a half percent on their £750 value, as before - or perhaps £34 per year on £561 cost of the 170 unsold shares, 6.1%. But this still doesn't get you a yield 'boost'.

The way they are calculating their boosted yield of 'almost 7%' is by saying that they paid £750, and then every penny of the £230+ returned to them was cost and not gain, so the remaining cost is under 520 depending on your broker charges, and so the yield on your nice low cost is over 6.5% (even though the yield on what the shares are worth, which is all that matters for investment decision-making, is much lower). But if they're doing that and saying all the money coing back is cost and not gains, they can't really say you are banking the gains.

There is nothing inherently wrong with deciding to take some money off the table and trimming back your exposure to RM to your original investment level of £750 rather than the £980+ you find yourself with. Top-slicing is fine. But RM is no longer the same tantalising investment it was at IPO, so if £750 was the right level of investment for you then, it might be more than you really want now. The linked Telegraph/Questor article says that it was a screaming buy pre IPO, but "given the risks Questor would say Royal Mail is not a buy at these prices."

I would suggest the average punter looking to cash in some profits, and needing to pay dealing fees as he does, should consider that he might as well sell ALL of his 227 shares and treat any piece he does not sell, as a new 'buy'. Would you buy 170 shares at current prices? Remember there are millions of investment options out there, and Questor thinks that RM is not a good 'buy' at today's price. If you think differently to Questor (which is fine because newspaper editorial is only opinion), and you think RM is a buy, why would you only buy 170 of it and not 227?

tuk

Price at market close yesterday: £4.55