Grey market values Direct Line at £2.76bn

DIRECT Line Group was yesterday valued at £2.76bn after customers began betting on the shares using a grey market listing ahead of next week’s expected IPO.

Spread betting firm ETX Capital set up the market yesterday morning and initially offered a range of 177-187p, implying this is the most likely IPO price. By the end of the day the spread had drifted upwards to 179-189p, suggesting a valuation of £2.76bn for the company.

The RBS-owned insurer is set to float on the London Stock Exchange on 11 October and is currently marketing shares with a 160-195p price range.

This is still well below what the investment banks advising RBS on the deal consider to be Direct Line’s true value but the state-owned parent group is keen to ensure the deal gets off the ground, even if this means accepting a lower price for the unit.

Meanwhile the float received a further boost yesterday as fellow insurer Talanx enjoyed a successful IPO in Frankfurt.

Although Talanx is primarily a reinsurer and Direct Line is more consumer-focused, analysts had drawn parallels between the two firms and problems with the German float could have damaged market sentiment.