Are Direct Line shares worth buying ?

Thrugelmir

RBS is being forced to sell off Direct Line by the European Commission. So the timing of the sale isn't not of RBS's choice.

sabretoothtigger

The selling is staged also, it wont be all at once. Questor says its good yield but a few companies in this sector are good yield, is RSA better?

Direct Line shares trade within proposed price range in grey market
Spread better quotes price of 179p to 189p ahead of insurer's flotation next week
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Royal Bank of Scotland shares are the leading faller in the FTSE 100, and its soon to be floated insurance business Direct Line is not setting the world alight in the grey market either.

RBS is down 7.4p at 259p, following a downgrade by UBS from buy to neutral, as well as concerns about the eurozone crisis.

As part of an agreement with the EU, the bank has to sell Direct Line by the end of 2014. An initial tranche is being offered this month at between 160p and 195p, valuing the business at around £2.6bn, lower than the £3bn analysts had been expecting. Dealings are due to start on 11 October.

But ETX Capital has set up a grey market listing and the current spread is 179p to 189p, below the top end of the price range albeit up from the initial indication of 177p to 187p as buyers emerge.

rh22uk

I cannot work out what the difference is between buying the primary shares in the IPO at the offer price (whatever that ends up being) compared to just waiting and buying the shares in the secondary market?

Can anyone explain? They're must be an advantage to this...

Reaper

pp87 wrote: »

I cannot work out what the difference is between buying the primary shares in the IPO at the offer price (whatever that ends up being) compared to just waiting and buying the shares in the secondary market?

Can anyone explain? They're must be an advantage to this...

Because it is being sold at a fixed price which may not match what the market price is. So if you think the offer price is 5% too low you might buy and enjoy a quick profit. On the other hand it can work the other way and a number of recent big name IPOs are trading well below their launch prices (Facebook, Groupon etc).

Voyager2002

Reaper wrote: »

Because it is being sold at a fixed price which may not match what the market price is. So if you think the offer price is 5% too low you might buy and enjoy a quick profit. On the other hand it can work the other way and a number of recent big name IPOs are trading well below their launch prices (Facebook, Groupon etc).

There may also be a difference in dealing costs.

gkerr4

i think, on the research i have done, that its a decent business. I can't find a reason why RBS would have sold it on if they hadn't been forced to by the regulatory bodies so it was quite likely a decent earner for them.

I'm still looking and considering though - closing date is next tuesday (9th) - not sure that we will know more about the float price (other than the pre-published 'range' that we already know) before then will we?

Pantera_Fan

Lokolo wrote: »

I think they would be quite good, however the one thing that gets me is that they refuse to go onto comparison websites.

More and more people use them every year and I can't help but feel they are losing business out of this.

Not strictly true when looking at the group as a whole.

Remember the IPO is for Direct Line Group which incorporates numerous brands such as Direct Line, Churchill, Green Flag, NIG etc.

Whilst Direct Line the brand is not on comparison sites Direct Line Group are on comparison sites through brands such as Churchill.

rh22uk

Reaper wrote: »

Because it is being sold at a fixed price which may not match what the market price is. So if you think the offer price is 5% too low you might buy and enjoy a quick profit. On the other hand it can work the other way and a number of recent big name IPOs are trading well below their launch prices (Facebook, Groupon etc).

So, as I think it wont shoot up and will probably stay around about the same, I guess there are no advantages to me so I will wait for the secondary market. (famous last words...)

Thanks for your help.

gkerr4

pp87 wrote: »

So, as I think it wont shoot up and will probably stay around about the same, I guess there are no advantages to me so I will wait for the secondary market. (famous last words...)

Thanks for your help.

i'm not so sure as this - whilst i haven't made my mind up, if i do buy it, i'm only interested in the short term - hours or days, not months or years.

personally, i think there is a few % to be had in the opening - but i've been wrong before!

Lakeuk

Insurance is a tough market, look at the groups core operating ratios in the Motor, Commercial they're paying out more than they get in, ratios have got better between 2010 and 2011

Home, rescue, pets, travel they are bring in more than they're paying out but the ratio has gone worse between 2010 and 2011

It doesn't take much to flip from profit to loss, the weather in the UK this year hasn't been great