Pension funds and other institutional investors were the primary beneficiaries of Royal Mail Group's 38% stock jump Thursday on its trading debut.
U.K. Business Secretary Vince Cable said Friday on the BBC that the aim had been to secure committed shareholders for Britain's 360-year-old postal service in its initial public offering. About 90% of the institutional allocation was placed with long-term investors such as pension funds and life insurance companies, with about 10% going to hedge funds, and the majority of institutional orders — 500 out of about 800 — received no shares at all.
Among successful subscribers were Threadneedle Investments, Fidelity Investments, BlackRock and Standard Life Investments.
The shares, sold to investors for 330 pence ($5.30) in the U.K.'s biggest state asset sale since British Rail was broken up in the 1990s, rose as much as 126 pence to 456 pence.
The IPO raised £1.7 billion for state coffers. Royal Mail's stock closed at 455 pence, valuing the company at £4.6 billion.
The institutional allocation was cut to 67% from the planned 70%, the government said Thursday, with small investors getting 33% of the issue, up from 30%, after the stock assigned to them was seven times oversubscribed.
Royal Mail will pay investors a dividend of £133 million in July, the government said, and a notional full-year dividend of £200 million, which translates into a 6.1% dividend yield for 2014.
The U.K. government took over the assets and liabilities of the £30.5 billion Royal Mail Pension Plan, London, in 2012 as part of plans to sell Royal Mail.