Although the price is in the bottom half of the original range, it is significantly above worst fears and has been reached despite a fragile market for new issues.
London’s initial public offering (IPO) market will be hoping the success of Direct Line in finding institutional support for its share offering – it will raise up to £875m, depending on the number of shares issued – will help sentiment and encourage other large unlisted companies to float.
The last major flotation was that of commodities group Glencore, which raised £6.2bn in May 2011. Just three flotations prior to Direct Line have succeeded on the main London market this year.
Bankers in the syndicate who were initially sceptical of the group, which is being partially sold off by RBS, say they have been pleasantly surprised by the management team, especially the performance of chief executive Paul Geddes.
Some had felt Geddes, a former marketing executive, did not have sufficient experience to run a newly-floated company of this size, but now say he has dealt well with questions from institutional investors.
However analysts remain sceptical about the investment case. Marcus Barnard of Oriel Securities said the offering remains an “uninspiring IPO from an inefficient company with limited growth prospects”.