City Analysts are stating that the flotation of government owned Direct Line is priced well, as the share price is up 7% today on the grey markets from the initial offering of £175 per share. The official floatation is not until the 16th of October.
However this begs the question that the company is being sold cheap and the taxpayer losing again.
The UK government has pumped more than 21 billion pounds into RBS, and the insurance side is one of the most profitable areas.
The Stock market listing of the company, which also owns the Churchill and Green Flag brands, is the largest in London this year.
Private investors have been less sceptical about the float than other institutions.
At 175p a share, Direct Line would have had a market value of £2.63bn, which is much is lower than a £2.8bn-£3.5bn value placed on the insurer by the IPO advisor. Clearly the private investors see a quick profit to be made.
The future of the Croydon based company, which invented call centres, might appear rosy to those looking to make a quick buck, however the UK car insurance market is already saturated and the competition enquiry into car insurance might crimp future profits, however the brand under new management has been seen to perform well over the last two years.
