Vince Cable, the Business Secretary and the Department of Business are now facing allegations that the shares of the recently privatised Royal Mail too cheaply as the share value touched 500p.

Many believe that the government undervalued the shares of the mailing service in order to ensure that the prices rise after floatation and prove that the issue was a success. However, many are now accusing the government of causing loss of hundreds of millions of pounds to the taxpayers.

The shares of Royal Mail had recorded an increase of 38 per cent to 455p per share during the first day of conditional dealings on the London Stock Exchange. The sale was priced at 330p a share and valued the firm at £3.3 billion. The demand for the shares has been higher than supply and the individual investors have been limited to £750 worth.

According to estimates by Investec, the small investors made an average profit of nearly £160million. The investors were buying the shares to make an instant 25 per cent as the government decided to sell the shares cheaper but the shares have risen much higher than their issue price.