London (AFP) - Royal Mail's controversial privatisation should be called off as its shares are undervalued by as much as £1 billion, the Labour Party said Monday, the day before the order books close.
Plans were launched last month to sell over half of the state-run postal service in what is set to be Britain's biggest government share flotation in decades.
The announcement was part of the government's strategy to slash the budget deficit -- but it sparked anger from trade unions who claim the move will provide a worse service for customers and have threatened to strike.
Investors have rushed to buy the shares in the initial public offering (IPO) before Tuesday's midnight deadline, hoping to enjoy big profits amid reports the stock is priced too low.
Priced at between 260 pence and 330 pence, the shares give the company a value of between £2.6 billion and £3.3 billion -- but their value is expected to rise sharply when full trading begins on the London Stock Exchange on Tuesday next week.
Shadow business secretary Chuka Umunna urged the government to halt the privatisation, saying Royal Mail had been undervalued due to the value of three major pieces of London real estate not being properly factored in.
Two of these, at Nine Elms and Mount Pleasant, are reportedly worth £1.5 billion combined, he added.
He argued that these could later be sold, resulting in a windfall for investors and leaving taxpayers out of pocket.
"The worst thing is that we're now seeing the government pressing ahead with this, despite the fact it's quite clear now they're going to be selling this at a huge undervalue," Umunna told ITV's Daybreak programme.
"What this is really turning into is that it's a dream for City speculators and the hedge funds, but it's a nightmare for the taxpayer, who ultimately doesn't want this to happen anyway, and is also now being hugely short-changed," he added.
"That's why I'm saying pull the plug on this, it's not too late."
Former home secretary and shadow Chancellor Alan Johnson, who worked as a postman as a teenager, also said the valuation was too low.
"There is a vast difference between pricing Royal Mail shares conservatively and undervaluing them by £1 billion," Johnson told the Daily Telegraph.
"This is ripping off the taxpayer on an epic scale."
A Department for Business spokesman said: "Royal Mail was clear about its intentions around property in the prospectus. The company disclosed details of its three major surplus sites currently undergoing pre-development work.
"It has also been clear that there are a limited number of other sites with potential for development for alternative use, but for the most part these sites are not readily realisable because they are used by the company's operations."
