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British public flock to Royal Mail share offer

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Britain's biggest privatization in decades captured the imagination of the public, with 700,000 individuals applying for seven times the number of Royal Mail shares on offer to private investors.

Despite the threat of strike action from delivery staff and criticism from the opposition Labour party, the government is close to completing the controversial disposal of a majority stake in the company, which is almost 500 years old.

Order books closed on Tuesday, with the sell-off expected to value the firm at around 3.3 billion pounds ($5.31 billion), the top of the government's target price range.

(Read More: Institutions rush to buy into Royal Mail's 'stunning debut')

The flotation is one of Britain's most significant since the late 1980s and 90s, when British Gas and other state industries, such as the railways, were sold off.

Some 4.5 million people applied for shares in British Gas, which was privatized in 1986, raising 5.4 billion pounds.

"We haven't yet got the final figures but my very rough estimate is that we've had about 700,000 applications and it's about seven times oversubscribed,"

Business Secretary Vince Cable told a parliamentary committee, referring to the retail portion of the offer.

Financial bookmakers IG said the mid-price for shares in the grey market was 404 pence, suggesting investors could make around a 20 percent profit at the top of the government's 260-330 pence range when the shares begin trading on October 11.

(Read More: Britain set to price Royal Mail sale at top of range: Sources)

The final details of the offering are due to be published on Friday, but the government has said around 30 percent of the shares on offer are expected to go to members of the public.

Individuals were required to spend a minimum of 750 pounds to invest, but the strong demand means orders are likely to be scaled back. Institutional investors have also been warned they should not expect to get all the shares they have bid for.

Cable said he expected the banks coordinating the sale to favor long-term investors such as pension funds at the expense of short-term speculators when allocating the institutional tranche of shares.

Royal Mail gets ready for IPO

"We're trying to ensure that on this occasion the share book is dominated by responsible long-term institutional investors who will help the Mail through a long period of adjustment and hopefully successful business," Cable said.

The government has also agreed to hand 10 percent of Royal Mail's shares to staff in the largest share giveaway of any major British privatisation.

Although trade unions are currently balloting for strike action, a source said on Tuesday that just 368 of the 150,000 eligible UK-based workers had declined to take up their free shares, worth around 2,200 pounds per person.

(Read More: Britain's Royal Mail to be valued at up to $5.3 billion in share sale)

The Labour party has accused the government of pricing the sale too low, and has called for an inquiry into the deal, saying the firm's London property portfolio was so valuable that taxpayers could be short-changed.

Cable, who earlier this week accused Labour of irresponsibly talking up the value of the shares, repeatedly defended the privatization's price tag over questions about whether the value of this portfolio had been correctly assessed.

"We're confident that it's priced in the right place," he said.