Wealthy investors may be snubbed in Royal Mail share flotation Under the terms of the float, City institutions were guaranteed to receive 70 per cent of the share issue and small investors 30 per cent. Vince Cable, the Business Secretary, said on Wednesday that seven times more small investors had applied for shares than expected. He was meeting Michael Fallon, the business minister in charge of the flotation, on Wednesday night to work out the final allocation for investors. Their recommendations will be passed to David Cameron and his deputy Nick Clegg on Thursday to allow them to make the final ruling. Mr Cable announced Wednesday that 700,000 retail investors had subscribed for shares by Tuesday's midnight deadline. City analysts calculated that small investors had bid for £3.5 billion of shares, when only around £500 million of stock was on offer. Mr Fallon said on Monday that he was "committed" to ensuring that investors get their "fair share" of shares. However, on Wednesday night a Government spokesman refused to guarantee that every small investor who had applied for shares would receive some in the flotation. A spokesman said: "We cannot offer you further guidance on that at this time. The decision has not been taken. Whitehall sources pointed to previous flotations in the 1990s when private investors who bid for large holdings were left with nothing, while people who sought small holdings received their entitlement in full. It is understood that less than 10 percent of those applying for shares would be affected by the decision to exclude those hoping to buy large numbers of shares. Mr Cable had said that the minimum application size for the public of £750-worth of shares was intended "to be sufficient to attract people of very modest means and ordinary households." This, along with forecasts of instant profits, appeared to have led to the strongest demand since the big state privatisations of the late 1980s, when British Gas and other state industries were sold off. City experts calculated that the average retail investor applied for £5,000-worth of Royal Mail shares. Yet such was the demand that the number of shares on offer would leave them with an average of only £737-worth of stock each. Mr Cable defended his decision to price the shares at between £3 and £3.30, despite Labour claims that it was too low. He told MPs that officials had relied on a number of assessments from City experts "on what the proper price should be." He said: "There was a lot of interest and that suggests we didn't overprice it." Asked if he was worried that smaller investors might feel they have lost out, Mr Cable said: "What we have set is what we think is a realistic price range to get good value for money for the taxpayer and to provide a stable investor base. That is the purpose in establishing the price and we think we are in the right place. Gerd Zonneveld, an analyst at Panmure Gordon, who had claimed consistently that the shares were undervalued, said: "The conclusion is that there has been overwhelming demand from institutional investors and from retail investors. Both categories of investors are likely to be scaled back considerably. If you are a retail investor and you have put in for £750 you may get £750, if you are an affluent investor who put in for £50,000, you are not going to get £50,000, and you will be scaled back considerably. How they are going to do that is unclear.