Royal Mail's FTSE Position Will Not Affect Business Mail

Business Mail Services

If you've heard all the hype around Royal Mail being dropped from the FTSE 100 a few days back, don't get worked up about it. The position of the company on the popular exchange will not affect business mail. Falling from the top 100 to the top 250 is simply a reflection of the challenging market Royal Mail finds itself in right now.

The BBC and other media outlets reported on 30th August that the FTSE 100 blue-chip index finished up by 27.83 points. Royal Mail did not follow. Its shares closed at 390.5p equalling a market capitalisation of £4 billion. That was not enough to keep the company at 90th place or higher, meaning Royal Mail would show up on the top 250 the next morning.

Why It Will Not Affect Business Mail

Royal Mail's fall from the FTSE 100 is important mostly to investors interested in buying stocks and shares. The company's share price may not be what investors hoped it would be at this point, but it is still rather strong considering the shrinking market for traditional postal mail. Royal Mail is still in a strong financial position in terms of both cash flow and reserves.

What should be understood is that stock prices and market capitalization fall and rise on a daily basis. It would be one thing if Royal Mail's stock price crashed by double digits in a single day, but that hasn't happened. Furthermore, Royal Mail is in a position of having to address falling demand for traditional mail even as other companies are entering new markets with the rebounding economy.

Here's the point: Royal Mail will continue handling business mail for the foreseeable future regardless of its position on the blue-chip index. The company is not relying on investor opinions to conduct day-to-day operations. Moreover, falling from the top 100 gives the company a bit more direction about how to pursue future business ventures.

Strong Business Mail and Parcels

Royal Mail is struggling with the loss of private mail in the digital era. Both companies and individual citizens are now using electronic means of messaging wherever they can avoid postal mail, which is something Royal Mail has been anticipating for quite some time. The good news is that the demand for business mail and parcels is still very strong.

Both are hard to replace via digital means. That explains why Royal Mail has invested so much in both areas over the last several years. It also explains the development of the Mailmark system, the roll out of new mail franking machines, and better postal rates for business mail customers who use the new machines.

There is no need to panic over Royal Mail falling out of the FTSE 100. The FTSE is nothing more than a stock index that gives investors direction about where to put their money. It means very little to business mail customers who send their letters and parcels every single day.

BBC – http://www.bbc.com/news/business-41093894

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