Nearly 700,000 small investors saw their stakes increase by around £280 as the price closed up more than a third at 455p, while around 150,000 postal workers could be sitting on stakes worth more than £3,000.
But amid the flotation fever in the City, Ministers were facing accusations that financiers have been allowed to profit from public assets being sold off cheaply.
Shares representing a 52.2 per cent stake in Royal Mail had been snapped up at a price of 330p by institutional investors, who were allocated two-thirds of the stock, and ordinary members of the public – known as retail investors – given a third.
The price soared as conditional dealing began, overwhelming stockbrokers with interest and crashing the website of one major brokerage, Hargreaves Lansdown.
More than 100 million shares were traded in the first hour, sending the price up to a high of almost 460p.
Retail investors who cashed in at that level netted a paper profit of around £290, based on their allocation of 227 shares each.
Yesterday’s 455p closing price values the letter and parcel delivery firm at £1.25bn above the £3.3bn implied by the offer price – more than a third higher than investors paid for the stock.
Business Secretary Vince Cable dismissed claims it had been undervalued, telling BBC Radio 4’s Today programme the sharp price rise was no more than “froth and speculation” and insisting the sale was a good deal. He said long-term, stable investors had picked up the bulk of shares.
And Prime Minister David Cameron also brushed off concerns when he was asked about the privatisation during a visit to Belfast.
He said: “We should celebrate the success of the privatisation of this business. It’s not only good for its employees, who have become shareholders, it’s not only good for the shareholders who now own this company, it’s good for the company itself.
“Royal Mail is in a very competitive market; it can now access capital and access private sector management techniques.”
Mr Cameron said the privatisation was good for all the economy. He added: “As for price let’s see what happens in the days and weeks ahead. What really matters is this has got off to a very good start.”
But Labour leader Ed Miliband said: “It’s a fire sale of a great institution at a knock-down price. It has been undervalued for taxpayers and undervalued for customers. Its a dogmatic privatisation by this Government and they have made it even worse by undervaluing it.
“The Government are doing it for ideology and it’s not in the best interests of this country.”
Many will not be able to sell until full trading in the shares begins next Tuesday but those who bought through brokers were already able to cash in, with bundles of 227 shares being sold off throughout the morning.
The actual value of around 150,000 Royal Mail employees’ 10 per cent stake in the company will be priced on Tuesday, but based on yesterday’s close this would work out at more than £3,000 per employee.
However, staff cannot sell for three years. A further 15,000 staff took part in the offer to buy shares.
Billy Hayes, general secretary of the Communication Workers’ Union, described it as “a tragedy” and told the Today programme that despite the free shares for employees, a ballot next week was likely to back industrial action.
“Vince Cable, one of the cleverest men in British politics, has made one of the stupidest decisions he is ever likely to make as a politician,” he said.