One of the world's largest investment banks told ministers ahead of the Royal Mail flotation that they could sell the postal business for £10bn, around two and a half times more than the government finally received for it.
News of the valuation from JP Morgan re-ignited the huge row over the privatisation with Billy Hayes, the postal workers union leader, claiming a "conspiracy against the taxpayer" and demanding the sacking of Vince Cable as business secretary.
The government sold shares in Royal Mail for 330p each, valuing the business at £3.3bn on 11 October. But the shares rocketed in value by almost 40% that day alone and closed at 529p, making the company worth more than £5bn.
The official float figure excluded around £800m of debt, which included would give the state-owned business an "enterprise value" of £4.1bn but still almost £6bn lower than the price tag suggested by JP Morgan.
The US bank declined to comment but well-placed sources confirmed the figure of £10bn and made clear that others pitching to sell the Royal Mail on behalf of the government had also priced the mail company as high as £7bn.
The Department of Business said a whole range of different price tags had been put on Royal Mail at different stages of the sell-off process which was conducted in the most thorough way. "The banks' proposals came months before any threat of strike action by the unions, financial market uncertainty in the United States and other factors which the government has already said were taken into consideration in setting a price for the company in September," said a spokesman.