Cable pens another defence of Royal Mail selloff as shares soar to 500p

Shares in Royal Mail hit 500p this morning, soaring up 50 per cent since they were initially floated on the stock market last week at 330p.

Vince Cable has again defended the pricing of the company, rebutting claims that he cost the taxpayers hundreds of millions of pounds by undervaluing shares, reports Sky News' City Editor Mark Kleinman.

Cable said that the price of the privatisation should be assessed only after the government has sold its entire stake in the company.

Sky News published a letter sent by Cable today to the Business, Innovation and Skills Select Committee, reporting that the business secretary had already written to BIS standing by the 330p share pricing.

The letter denies the notion of misvaluing, after the share price rose 38 per cent on the first day of trading. He wrote:

Value for money has been central to our strategy as we have taken forward the sale of shares through an initial public offering. Delivering value for money is about more than just the level of proceeds received on day one.

Our long-term strategy to safeguard the universal service and deliver value for money for the taxpayer involves not only getting good value for the initial stake sold but also getting good value for the residual stake held by Government (30% of the Company assuming exercising in full the Over-allotment Option), and leaving Royal Mail in a strong, sustainable position capable of accessing the capital markets in the future.

In August 2013, as the date of the IPO approached, this list of potential investors was narrowed down to a focused group of approximately 20 investors, selected on the basis of feedback gathered during the investor engagement process and, in particular, their understanding of the risks inherent in the Company’s industrial relations.

Cable added that the Royal Mail's IPO, which was given a value of between £2.6bn and £3.3bn, was recommend by Goldman Sachs and UBS, with Lazard endorsing the float and giving advice to ministers.

Cable has been asked to appear before the Commons committee looking to probe the selloff and grill the City bankers responsible for advising the government. Tory MP Nadhim Zahawi has also said Labour shadow business secretary Chuka Umunna should go before the November hearing.