MPs launch Royal Mail inquiry as share rise continues

A pigeon flies past a Royal Mail post box outside Charing Cross station in central London
A pigeon flies past a Royal Mail post box outside Charing Cross station in central London, October 8, 2013. REUTERS/Andrew Winning

By Kylie MacLellan and William James

LONDON (Reuters) - Shares in Royal Mail peaked 48 percent above their privatisation price on Tuesday as a committee of MPs said it planned to summon bankers and the business minister to a parliamentary inquiry into the sale.

The government, which last week priced the hugely oversubscribed sale of the near 500-year-old postal service at 330 pence per share, has been accused of undervaluing one of Britain's biggest state sell-offs for decades.

A parliamentary committee that scrutinises government work said it wanted investment bank Lazard, an adviser on the privatisation, and Business Secretary Vince Cable to appear before the panel to discuss the deal.

A spokesman for the Business, Innovation and Skills committee said the session was expected to take place in November.

On its first day of full trading, the Royal Mail stock hit a record high of 490p before closing up 2.9 percent on the day at 489p. The shares initially rose nearly 40 percent last Friday when they began trading conditionally.

Before Tuesday, only institutional investors such as pension funds and individual investors who ordered stock through a broker offering conditional trading were able to sell, not those who bought through the government's official website or by post.

Last week, before the sale had been priced, the committee quizzed Cable on whether Royal Mail could be undervalued after some analysts said its London property portfolio may be worth much more than the official estimates.

A poll by YouGov over the weekend showed while opposition to the privatisation had fallen, with 56 percent believing it was wrong compared with 67 percent in July, 43 percent said they thought Royal Mail had been sold for less than it was worth.

Four percent said the price was too high and 17 percent said it was about right.

The government handed 10 percent of Royal Mail's shares to staff in the largest share giveaway of any major British privatisation, with just 368 of the 150,000 eligible UK-based workers declining to take up their free shares.

Royal Mail said each eligible employee would receive 725 shares, with an initial market value of 3,545.25 pounds, although they are required to hold on to them for three years.

As the value was based on Tuesday's closing mid-price, the stock's strong rise meant it was well above the 2,200 pounds per person estimated and exceeds the government limit on the maximum value of free shares that can be given to an employee in any tax year. Royal Mail said as a result it would split the allocation across two years.

The Communication Workers Union (CWU), which represents postal workers, is due on Wednesday to announce the result of a strike ballot called in response to the privatisation. The earliest it could take action is October 23.

"We're confident our members will return a 'yes' vote in tomorrow's ballot result ... strengthening our position to secure a deal on protecting jobs, services and terms and conditions in the company," said Dave Ward, CWU deputy general secretary.

(Editing by Greg Mahlich, John Stonestreet and David Evans)