Royal Mail's controversial privatisation will not be probed by the Financial Conduct Authority, despite its cheap valuation meaning that the taxpayer effectively lost £750 million on the first day it floated on the stock market.
FCA chief executive Martin Wheatley told MPs that the watchdog had seen no evidence of regulatory failure, despite being unable to say if the process - which saw Royal Mail's share price soar 38% in the first day - had entirely complied with the rules as it had not launched an investigation.
Public accounts chairwoman Margaret Hodge mocked Wheatley for hiding behind a "chicken and egg" scenario, adding: "I'm left astounded. I don't know in what circumstances that you'd do something."
Austin Mitchell, Labour member of the committee, mocked the watchdog's oversight of the process, quipping that famously half-blind admiral Lord Nelson "would have been a good chairman of the Financial Conduct Authority".
A report by the National Audit Office, the government's public spending watchdog, earlier this month found that the the government's desire for a successful Royal Mail sale, by ensuring investors were not put off by a prohibitively high price, "resulted in the shares being priced at a level substantially below that at which they started trading".
Ministers valued Royal Mail for its initial stock market flotation last October at 330p-a-share, however the business' share price continued to rise to 619p in January and increased by 72% over the first five months of trading.
Wheatley told MPs that there was no "unexplained" share price movement, adding: "Our job is to look at whether there has been regulatory failure and there's nothing that I've seen so far that suggests that there was a regulatory failure."
Wheatley argued that the process' failure resided in officials pricing of the business, as MPs asked why officials did not reprice the Royal Mail shares before the initial flotation given that it was clear that investors' demand was massively in excess of the available shares.
But Hodge insisted that there were "questions to be answered" as officials failed to raise the share price before flotation in light of "lots of indicators that demonstrate an undervaluation".
The FCA chief executive admitted that "it wasn't quite perfect competition" as "selected investors were given a [share] allocation early.
In its report, the NAO found that 16 "priority investors", selected by Lib Dem business secretary Vince Cable for their long-term investor potential, had cashed in on their shares allocation within weeks of the stock market float, making a substantial profit. By the end of January, just 12% of Royal Mail's shares were held by "priority investors".
Many of the shares were then seized by hedge funds, which Cable previously attacked as short-term investors who were "spivs and gamblers".
Business minister Michael Fallon insisted that the Royal Mail privatisation had been a "success", adding: "I don’t think we did get it wrong. We got the issue away; this was one of the biggest privatisations for 20 years; a loss-making public corporation has now been transformed into one of the top 100 British companies; 10% of the shares are in the hands of the staff, and three-quarters of a million people invested in it as well."