By Dan Lalor

LONDON (Reuters) - The government is selling its 18.9 percent stake in QinetiQ, the defence technology company it was criticised for selling too cheaply in 2003 and allowing top executives pocket 200 times what they invested.

QinetiQ shares, which set a record high at 235.23 pence on September 3, fell 7.5 percent to 207 pence early on Tuesday.

The government owns 124.9 million shares in Qinetiq, part of the Ministry of Defence's (MoD) secretive technology development laboratories before the government sold a stake to U.S. private equity firm Carlyle Group for 42 million pounds in 2003. Carlyle cashed in its shares after QinetiQ floated in 2006, reaping more than 370 million pounds.

Britain said on Tuesday the MoD would retain the special share it owns in QinetiQ, which develops technologies for aircraft, airports, and the defence and security sectors.

"The offering will be effected by way of an accelerated bookbuilt offering to be launched immediately," the government said in a statement.

Last November, the National Audit Office said the government had got too little for the initial stake it sold.

"The National Audit Office believe greater proceeds could have been secured from the 2003 sale," the NAO, which is charged with monitoring government spending and investigating waste, said then in a report that found fault with several steps taken by the ministry.

Carlyle was appointed as preferred bidder too early, making the process less competitive than it might have been, and the ministry was wrong to negotiate the deal before finalising terms of a lucrative long-term partnering agreement between it and the company, the NAO said.