Lloyds has announced the pricing of TSB shares - and it looks like the bank has gone for an 'entice investors' approach, rather than 'make as much cash as we're humanly able'. Is it us, or is there a strange sense of déjà vu...?
In a statement to the stock exchange this morning, Lloyds said TSB shares will be priced at between 220p - 290p when it sells a 25% stake in the bank on 20 June ('or thereabouts'). At the mid-point, that values it at £1.275bn - a 10% discount on its book value.
Now of course it's traditional for companies to price shares to attract investors. But this is a taxpayer-owned company going private, so Lloyds and TSB's management have a dangerous course to steer. Price shares too high, and they'll be accused of not getting enough value for taxpayers. Too low, and they'll be accused of pricing out ordinary investors.
The government has been in this situation before: specifically, last autumn, when it IPOd Royal Mail and shares rocketed almost immediately from 330p to 455p, suggesting they were priced far too low. At the moment they're hovering at just over 467p.
Then there was the time in March that Lloyds tried to sell off a second tranche of shares, and investors showed their ire at the fact they were priced at almost exactly the same level as the first tranche by kind of shrugging and not buying any more. The issue wasn't under subscribed - but there wasn't much excitement, either.
What's clever about this issue is that at the top end of the range - 290p - TSB's shares put its value at £1.45bn. Given the Co-operative Bank once tried to buy the branch network that now makes up TSB (once known as Project Verde) at £1.44bn, the bank can say it's aiming for market value.
Although it has come a long way from a nameless, faceless group of branches in 2009. And if you factor in the value of its brand, the value of its 8,000 employees and the £450m 'dowry' Lloyds is willing to pay if it upgrades its IT system in the future (which was what threw off the Co-op deal), you could argue it's worth a lot more than it was five years ago. But who are we to speculate. We'll find out how the market feels on 20 June. Or thereabouts.