Lloyds shares are being hammered after the government offloaded another 7.8%

Investors aren't impressed at the bargain basement price the government has put on the lender.

by Emma Haslett
Last Updated: 01 May 2014

Shares in Lloyds Banking Group dropped by more than 4% this morning after the government cut its stake in the bank by 7.8% to just under 25%.

The sale, which was announced by UK Financial Investments (the government’s asset management arm) last night, was 1.7 times subscribed - but investors clearly weren’t impressed. Shares were sold at 75.5p, just 0.5p more than the price Lloyds achieved back in September when it floated its first 6% of the company, which naturally meant current shareholders were less than delighted.

Still - the government’s pleased. Having paid an average of 74p in cash for its Lloyds shares back when it bailed out the bank in 2008 (they’re on government books at an even lower 61p), it’s now making 75.5p out of them, generating a profit of about £105m for the taxpayer.

It now reckons that, if Lloyds can execute a share buyback in early 2015, the government may be able to offload its entire stake by election time in May. A nice little win for the Coalition: ‘Gordon Brown got us into this mess, we cleared it up’. Presumably it will try to brush its 81% stake in Royal Bank of Scotland, which is unlikely to be sold off for several years, under the carpet...

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