The scale of the meltdown left ministers and their financial advisers, BZW, in an acutely embarrassing position and provoked fresh questions about British Energy's prospects.
By the time the market closed the partly-paid shares had fallen from an offer price of 105p to 94p, having touched 92p at one stage, amid heavy trading with 80 million shares - 11.5 per cent of the total shares offered - changing hands.
A small investor who received the maximum allocation of 600 shares in the public offer was last night looking at a loss of pounds 30 on an investment of pounds 600. Private shareholders who took part in the retail tender and institutional investors were facing far heavier losses.
But it was British Energy's directors who were staring at the biggest individual losses. Chief executive Dr Robert Hawley bought 33,000 shares which were last night showing a loss of pounds 3,630, while chairman John Robb was nursing a pounds 2,200 loss and finance director Michael Kirwan a loss of pounds 1,650 on 15,000 shares.
As the scale of the sell-off became clear, a series of explanations was hastily assembled by advisers, ranging from the fall on Wall Street to adverse press reports and comments from former British Gas, chairman Sir Dennis Rooke, that shareholders had been conned when the business was floated in 1986.
Advisers also pointed to evidence of short-selling by market-makers - offering to sell shares they did not own in the expectation of being able to buy them at a cheaper price by the time they had to deliver the stock.
Attending the start of dealings at BZW's dealing room in the City, the President of the Board of Trade, Ian Lang, expressed satisfaction, saying the taxpayer had done "very well" out of the flotation. "I am very pleased with what we have achieved. This is a privatisation that six years ago we were told could not happen."
But John Battle, Labour's energy spokesman, said that the sale of British Energy looked increasingly like "a bad deal for shareholders as well as short-changing the taxpayer".
He also demanded to know whether there had been a cover-up by ministers to keep secret the closure of two of the company's stations until after the public share offer had closed.
The collapse in the shares yesterday was all the more surprising since the issue had been priced at the bottom end of the Government's range. At the fully-paid price of 203p the flotation will raise just pounds 1.4bn - pounds 500m less than the Government had initially expected.
Patrick Green, Friends of the Earth's senior energy campaigner, said: "The temptation to say we told you so is overwhelming. As British Energy's new owners contemplate their loss they should give some thought to why they ever fell for the nuclear con. Nuclear power never was and never will be a sound financial investment."
In the past, shares in privatised companies have performed badly shortly after dealings began only in exceptional market conditions or where the sale was a secondary offering. The BP share offer in 1987 was a victim of the worldwide crash. Secondary offerings of shares in BT and the two generators, National Power and PowerGen, also fared poorly.Reuse content