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Labour Says Royal Mail Sale Short Changed U.K. Taxpayers

The U.K.’s opposition Labour Party said the government may have short changed taxpayers by selling off Royal Mail Plc (RMG) shares too cheaply.

The postal operator, which was sold three months ago, has seen its shares rise by 70 percent since they started trading. Labour argues the sale could have raised “hundred of millions of pounds” more for taxpayers, according to an e-mailed statement by the party today.

Business Secretary Vince Cable was forced to defend the government’s handling of the sale, the country’s largest privatization since the 1990s, amid criticism the company had been undervalued at its initial public offering price of 3.3 billion pounds ($5.4 billion). The stock rose 38 percent on its first day of trading Oct. 11. That prompted Cable to say it didn’t mean the IPO was undervalued and the level at which shares eventually settled was what really mattered.

“Increasingly it looks like the taxpayer has been left short-changed,” Chuka Umunna, Labour’s business spokesman, said in a statement. Cable “has serious outstanding questions to answer on the price he could have received three months ago in respect of what increasingly looks like a botched privatization.”

Institutional investors ordered more than 20 times the amount available when the shares were first sold. Parliament’s Business, Innovation and Skills Committee heard in November that the sale was managed by the two banks that provided the lowest valuation, UBS AG (UBSN) and Goldman Sachs Group Inc.

Royal Mail shares fell 0.2 percent yesterday to 561 pence, compared with their initial sale price of 330 pence. The U.K.’s benchmark FTSE 100 index has risen 4 percent since Royal Mail began trading.

To contact the reporter on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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