Royal Mail shares soared in value by more than £1.1 billion yesterday as Con-Dem ministers flogged off the once proud state institution to private vultures on the cheap.

The government offered shares at 330p each at the start of the day - but they were going for 455p at close of play.

That meant an immediate return of more than £280 for the private speculators who scooped up £750 worth of shares in a government raffle.

Liberal Democrat Business Secretary Vince Cable dismissed the price rise as "froth and speculation" and denied the government had massively undervalued the shares.

"What matters is where the price eventually settles. If we look back at this in three months or six months time or years to come, that's what we are really interested in," he said.

But unions opposing the sell-off said the months to come would see shareholders straining the postal service to breaking point with short-term demands for dividends and asset-stripping.

The state retained a minority stake of 37.8 per cent in the company while more than 99 per cent of the 150,000 Royal Mail staff took the free shares offered to them.

A third of shares went to the general public and the remaining shares went to "institutional" investors such as hedge funds and insurance firms.

TUC general secretary Frances O'Grady accused the coalition of undervaluing the state asset - "selling five pound notes for four quid."

Ms O'Grady said: "No-one can be blamed for wanting a share of that, but let's not forget that this has taken something that belonged to all of us and given a large slice away for free to those who could afford an entry ticket.

"And everyone knows that in the long run the postal service will get worse, just as other privatised industries have ended up abusing markets and ripping off consumers."

Postal union CWU general secretary Billy Hayes said his members would not "stand idly by" as the service is destroyed.

Most members had taken the free shares offered them, he said, but their strike ballot continued apace.

Workers staged a mock robbery outside the London Stock Exchange to protest the move.

Mr Hayes added: "There's no celebrations in delivery offices round the country today. There's a real fear that privatisation will lead to what's happened in other utilities that have been privatised - things getting worse, reduced services and higher prices for the consumer," he said.

The ballot result is expected next Wednesday.

Meanwhile Labour Party leader Ed Miliband condemned the float as "a fire sale of a great institution."

"It's a dogmatic privatisation by this government and they have made it even worse by undervaluing it," he said.

But shadow business secretary Chuka Ummuna has refused to pledge to renationalise Royal Mail, despite huge pressure from his party to do so.