Labour Says Royal Mail IPO 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 shares too cheaply.

The postal operator, 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.”

Lowest Valuation

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 and Goldman Sachs Group Inc.

Royal Mail rose as much as 1.2 percent to 567.5 pence today, compared with its initial sale price of 330 pence, and was trading at 565 pence at 8:49 a.m. in London. The U.K.’s benchmark FTSE 100 index has risen more than 4 percent since Royal Mail began trading.

Business Minister Michael Fallon said today the sale was a success and set the company up for a stable future without the need to return to the government for more funding.

“You expect successful IPOs to go to a premium after they’ve been launched, and that’s been no surprise,” Fallon told BBC Radio 4’s “Today” show. “That company is now one of our top 100 companies and we’re very proud of that.”

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