British Parliament Berates 2 Officials on Royal Mail I.P.O.

LONDON - Usually it is falling stock prices after initial public offerings that cause headaches for bankers and business executives. In the case of Britain’s Royal Mail, it is the company’s soaring value that has ignited outrage.

At a testy hearing in front of a parliamentary committee on Tuesday, Vince Cable, the British business secretary, faced a fresh grilling over how the Royal Mail I.P.O. was priced.

Both Conservative and Labour ministers attacked Mr. Cable and his deputy, Michael Fallon, for selling British taxpayers short in the offering, saying it was priced too low and left up to 1.2 billion pounds of taxpayer money on the table.

Numerous members of Parliament demanded apologies and admissions of regret. They got none.

“Absolutely no apology and a recognition that hindsight is a wonderful thing,” Mr. Cable said in response to one of many requests for contrition. “Given the circumstances at the time, the correct decisions were made.”

Britain’s postal service was floated in October at 330 pence a share, valuing it at £3.3 billion. The price immediately surged and has risen as high as 600 pence a share.

Every aspect of the privatization is now under fire, including how it was priced, who got the shares, whether the bankers involved in the offering deserve bonuses and the value of the Royal Mail’s property portfolio.

Lazard acted as the government’s independent adviser, and Goldman Sachs and UBS acted as the global coordinators for the deal. On Wednesday, the deal bankers will testify before another committee.

The government and its bankers say the deal was a great success because they sold 600 million shares in a company they described as “fragile” and as a “turnaround.” The deal was extensively oversubscribed and the price did not fall. In sum, it did not flop.

Members of Parliament contend that the offering was an unmitigated disaster because the price of the shares soared about 39 percent on the first day and significantly more afterward. They insist the deal was rushed and that the government should have waited to get a better price.

They also say independent research that would have placed a higher valuation on the company was ignored. They told Mr. Cable and his deputy that they had “let these people down” and called their behavior “ridiculous” and “bizarre.”

In a fairly typical exchange from the meeting, Mr. Fallon said: “I haven’t seen any evidence that the shares were undervalued at the time of the flotation.” That comment made the chairman of the committee, Adrian Bailey, apoplectic.

“That’s Alice in Wonderland,” said Mr. Bailey, a Labour member of Parliament, noting that the share price soared on the day of the sale. “It’s an astonishing assertion.”

Pricing of I.P.O.s is a tricky endeavor. Go too high and no one buys. Price too low and the shares skyrocket, giving investors a huge profit (think the tech bubble in the late 1990s. when banks were accused of pricing too low to give investors big first day pops).

In the case of a privatization, the issue is particularly sensitive since the seller is the taxpayer.

Mr. Cable has long insisted that the risks at the time of the deal were such that they could not price the shares any higher. The postal workers union had threatened to strike and the United States was on the brink of defaulting on its government debt, causing concerns of a global economic cataclysm.

Kevin Slocombe, chief spokesman for the Communication Workers Union, expressed disbelief over Mr. Cable’s characterization that the offering was a success. “There really is nothing like ignoring facts, public, everyone else who understands industry,” he said in a Twitter message.

Another issue of contention was who exactly got to buy shares in the I.P.O. The Bureau of Investigative Journalism on Tuesday morning disclosed a list of some of the buyers, including sovereign wealth funds from Singapore and Kuwait, the Capital Group, the Och-Ziff Group and Landsdowne, a British hedge fund known for its close ties to the Conservative Party (one of the top executives was the best man at George Osborne’s wedding).

Many of the investors have sold significant stakes, reaping large profits, the report said.

Mr. Cable has said the priority investors were picked as “high quality institutions of the type that would form the core of a long-term supportive investor base.”

Mr. Cable also insisted that at a higher price, institutions would have walked away from the deal. That caused Brian Binley, an impassioned Conservative member of Parliament, to accuse the ministers and their bankers of being motivated by a fear of failure and ignoring demand that would have allowed a higher price.

“There is no link between oversubscription and the market price,” said Mr. Fallon, citing Facebook, which was 25 times oversubscribed but fell 10 percent on its first day of trading. (“We’re not talking about Facebook,” one politician barked in response.)

In April, the National Audit Office of Britain published its own analysis of the I.P.O. and concluded that £750 million was lost, or more specifically, could have been raised.

Much of the hearing was spent parsing whether the report deemed the transaction a success or failure, leading reasonable people to wonder if they were reading the same report.

At a separate inquiry, Martin Wheatley, the head of the Financial Conduct Authority, told the Public Accounts Committee that the agency would not investigate the Royal Mail offering or the bankers involved. He acknowledged that the first day price increase was large, but said there was “nothing to suggest” any regulatory failure.

Mr. Fallon, who seemed the most visibly annoyed by the line of questioning, said that had the price fallen, they would likely be under similar fire. “You certainly would be critical if it had fallen below its price.”