Undervalued Royal Mail shares cost UK taxpayers £750m in just one day

MPs said Business Secretary Vince Cable ignored City warnings that Royal Mail’s maximum share price of 330p left the company undervalued.

17:37 01 April 2014

In a scathing report released by the National Audit Office, it was claimed that the government’s “desperate” move to sell Royal Mail has cost taxpayers £750m in one single day.

The report also accuses Vince Cable of ignoring several City warnings that Royal Mail’s maximum share price of 330p left the company significantly undervalued.

Shares have increased by 38per cent on October 11; the day it made its debut on the stock market. It was the biggest one-day rise in a privatization since British Airways in 1987. The audit office said that the government could have made additional £750million had it priced each share at 455p instead of 330p starting price. The additional money could have been used to cover the annual salaries of an additional 34,000 NHS nurses.

Amyas Morse, head of the audit office, said: "The department was very keen to achieve its objective of selling Royal Mail, and was successful in getting the company listed on the FTSE 100. Its approach, however, was marked by deep caution, the price of which was borne by the taxpayer."

Meanwhile, Cable responded by saying: "Achieving the highest price possible at any cost and whatever the risk was never the aim of the sale. The report concludes there was a real risk of a failed sale attached to pushing the price too high. And a failed sale would have been the worst outcome for taxpayers and jeopardised the operation of Royal Mail."