I’ve been meaning to do a post on the Royal Mail IPO but haven’t had time to wade through the 200+ page prospectus beyond a brief glance. Lucky for me someone else has done most of the work I was planning to do so I thought I would share a blog-post by the Joyful Investor. He raises all the issues I had thought of and the prospectus doesn’t appear to answer them. To summarise the problems I see:
- It was loss making a couple of years ago, has it just been dressed up for the IPO or will it remain profitable long term?
- Letters are in decline but has been made up for by large increases in prices. Can this really go on forever? I don’t think the public, or weak political leaders would sit by and let it happen.
- They still operate a defined benefit pension, and future liabilities lie with the company, not the government.
On the flip side, it has a huge dividend and there are plenty of dividend whores out there at the moment. I wouldn’t be at all surprised if the shares do well in the short term. There is currently a lot of hype about them being over subscribed but anyone that followed the Facebook IPO will know that can suddenly turn post IPO. Long term I’m not really interested in holding them so I’m going to pass.