Are Direct Line shares worth buying ?

worldtraveller

I've taken the plunge. I just feel that with all the media coverage of recent poorly performing IPO's, like Glencore, Ocado and of course Facebook, together with the fact that RBS is no doubt under political pressure to secure a successful IPO with Direct Line, it'll mean that the price will be set at a level that will ensure success. IMHO, I expect some early, bankable profit, even at the higher end of the 160p-195p price range.

C_Mababejive

No..i wouldnt touch them with a barge pole...

gkerr4

C_Mababejive wrote: »

No..i wouldnt touch them with a barge pole...

love it! - any specific reason? or just not keen?

gkerr4

worldtraveller wrote: »

I've taken the plunge. I just feel that with all the media coverage of recent poorly performing IPO's, like Glencore, Ocado and of course Facebook, together with the fact that RBS is no doubt under political pressure to secure a successful IPO with Direct Line, it'll mean that the price will be set at a level that will ensure success. IMHO, I expect some early, bankable profit, even at the higher end of the 160p-195p price range.

i'm pretty much in tune with you - i think there is an element of early bankable profit.

being sold at 1-1.25 NAV and offering a yield of 7.5% (at mid-point) are too low and too high respectively. also at £2.6Bn it's an auto FTSE100 company (i think) so all fund managers / trackers are going to need to get into it.

I'm 90% sure i'll have a punt, not sure what size to apply for though. What are the chances of getting the full application amount?

bowlhead99

Like some others, I think this has upside because RBS are forced sellers and absolutely have to get rid of the other 75% which they are not selling at this round, in a reasonably short timeframe.

This is not going to 'do a Facebook' where the investment banks handling the disposal extract every last cent of value for the company and that portion of its former owners who were going for a value-maximising exit. Facebook's success on that occasion at raising the absolute maximum cash from new buyers was of course a disaster for those new buyers, and a mixed result for those existing private owners who only took a partial exit; but at least the remaining old owners can wait indefinitely for a recovery before selling, if they want.

In contrast, if RBS have priced this optimistically and it tanks over the next few weeks or months, the nervousness in the market will really scupper their chances of being able to offload another 2bn worth of shares over the next couple of years, which they have to do by law. Of course they could still get the rest away by placement to a strategic buyer but you'd want to sell your 75% for more than the 25%, not the other way around. This is great for people buying a slice of the 25%.

I think savvy institutions will know this, plus smart retail investors, and there will of course be dumb retail investors who buy in to the 'privatisation of a big famous brand name' without knowing the first thing about investing, plus the tracker funds who have to buy a piece of any IPO like this whether their manager likes it or not. As a result the demand should mean it doesn't go off with a whimper at the very bottom of the expected price range, but there should be some good upside from the launch price. A win-win for RBS and the public.

Personally I have gone in for an allocation the float - for the reasons above I think it will be cheaper to buy on float than during the first few trading days or weeks. Plus no dealing costs to acquire the shares this route. Long term I would not be overweight on this UK focussed car insurer, but short term I see some profit here. And it can be held in an ISA or SIPP if you have the capacity, so no tax on any profits.

Of course I would be very grateful if all of you do not buy in at float (keeping my entry price down), then buy on the open market instead, (pushing up my exit value). In hindsight I should delete this post... :beer:

Glen_Clark

'So, how attractive are shares in Direct Line? For private investors the answer is largely academic because the first of three projected tranches will be directed at institutional investors, although Barclays Stockbrokers will lead stockbrokers with a view to attracting retail interest.

'In fact, depending on demand, the number of shares that RBS makes available to retail buyers could be very few. But this is where it gets tricky because if allocations for retail investors suddenly rise, it could be as a result of institutional investors turning up their noses.'

Read more: http://www.thisismoney.co.uk/money/markets/article-2213441/Should-invest-Direct-Line.html#ixzz28WVXGIID

sabretoothtigger

I wonder where the RBS share price goes since they get the proceeds and a value placed on their remaining holding

Glen_Clark

Pantera_Fan wrote: »

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.

are you sure?
I got a much cheaper quote for my insurance from Churchill than GoCompare, I asked their salesman why they don't do Churchill and he said he didn't know.

Glen_Clark

Hester has been hawking Direct Line around the Private Equity Groups with no success. Thats why its going to IPO. But Institutional Investors first in the queue. Seems to me the little man will get the leftovers as usual?

sabretoothtigger

People who buy over a million worth of shares can qualify themselves as first in the queue but going to public people who have to be forced to buy 1000 minimum is a last resort because its such a pain to give all the warnings and info

Same as any business, best price goes to bulk