Royal Mail shares
jumped more than 38 per cent to 456p as it made its stock market debut on Friday.
The government placed the shares at 330p each, at the top of its expected range, giving the UK postal service a market value of £3.3bn.
The price spiked to 456p at the start of conditional dealing and eased back to 435p at midday.
There were about 10m shares traded in the first 30 seconds when the market opened.
The rise in the shares may fuel the debate over whether the initial public offering was priced too cheaply after the government was accused of short-changing taxpayers.
"The jump in the shares above 400p will certainly see the UK government being criticised for selling the company too cheaply, ripping off UK taxpayers but it must be noted that institutional allocations [bid above £10,000] have been scaled back this time, allowing allocation to retail clients which should go down neatly in general sentiment across the public that your man on the street could together with a institution, be a participant in this historic IPO [initial public offering] for the UK market," said ETX Capital's Head of Trading, Joe Rundle, who called the sale a "dazzling stock market debut".
Analysts at IG said the high of 456p indicated that the market capitalisation of the company is approximately a billion more than the government's initial valuation. "As it stands, this would effectively make the Royal Mail eligible for a FTSE 100 listing," the broker said.
Tens of thousands of people who tried to buy shares in the privatisation missed out. Business Secretary Vince Cable said there were 700,000 applications ahead of trading.
Private investors who applied for the minimum £750 investment will receive that amount but those who applied for more than £10,000 of shares will go without.
The government said 270,000 will receive at least half of the shares they had put in for application.
About 150,000 Royal Mail employees will each receive around £2,200 of free shares. Employees will also have their applications met up to £10,000.
Full trading will start on October 15th - when shares are listed officially and all retail investors will be able to sell - but City institutions began conditional dealings today.
The issue was subscribed by over 20 times, with 67% being assigned to institutional investors (90% of this amount went to long-term ones and 10% to hedge funds) and the rest to retail investors.
The government is now left with a 38% stake following the flotation. Should the government choose to exercise an over-allotment option - by selling extra shares due to strong demand - its interest will fall to 30%.
Royal Mail is expected to pay shareholders £200m in dividends this year, with £133m expected in July, for a notional dividend yield of 6.1% in 2014.
At the end of 2012 US rival UPS, whose market cap is $65.41bn, was offering a 3% dividend yield when based on that year´s full pay-out.