Royal Mail's largest shareholder a "blow to Vince Cable"
23rd October 2013 14:56
by Esther Armstrong from interactive investor
shares were up almost 4% in morning trading on the revelation Children's Investment Fund Management (TCI) had become the postal service's largest shareholder, with a 5.82% stake of the business.
The hedge fund, which is run by Chris Hohn, was forced to disclose its holding on the stock exchange after it went above 5%. Prior to its most recent top up the fund held 4.98% of Royal Mail shares.
Brenda Kelly, market analyst at IG, said the fact a hedge fund had waded into the fray on Royal Mail with such a large stake was a "blow to Vince Cable" who had wanted to keep shares with retail investors as much as possible.
She added that the hedge fund was likely to be more active than the average retail holder of Royal Mail.
Meanwhile, Cable's comment that Royal Mail's share price hike since flotation was frothy and speculative was also questioned by Kelly because so far the stock is holding up: "Any selling that has happened has seen buyers coming out the woodwork, and they have been active as well," she said.
London-based TCI was founded in 2011 and manages The Children's Investment Master Fund. Its name comes from a charitable foundation, The Children's Investment Fund Foundation (CIFF), which was set up by Hohn and his wife Jamie Cooper-Hohn who chairs the charity.
Up until earlier this year CIFF received 0.5% of the hedge fund's profits, according to hedgetracker, which said the fund has assets under management of over $6 billion (£3.71 billion).
Hohn follows a long-biased, value-oriented approach and is known for his shareholder activism.
He famously bought £500 million of shares in after the phone hacking scandal broke in 2011 and the shares had tumbled in value.
As at the end of June Hohn had 47.44% of TCI in News Corp, 27.23% in and 17.44% in - its top three positions of a total of ten.
Investor view
Over on the Interactive Investor discussion board 'gresham street' said analysts were mooting a takeover following the revelation of the TCI stake.
But other investors felt a takeover was unlikely while the government still holds 30%+ of the company.
'PXS_crazy' said: "Following completion of the IPO and the free allotment of 10% of Royal Mail's share capital to its eligible UK-based employees, HM Government will remain with a 37.8% holding in Royal Mail, which will be reduced to 30% if the over-allotment option is exercised in full."