Because of the uncertainty surrounding the exact number of shares that will be issued IG will, as usual, be setting the IPO price as per the company’s market capitalisation – the spread of which, at the time of writing, is £2.05-£2.15 billion. This price will be driven by business executed by IG’s clients.
This IPO will see the company selling 25% of the bank as it aims to raise at least £150 million, although current indications point towards a figure far closer to £500 million. Funds raised will be used for a number of opportunities in order to enhance the growth of the business. One of the main uses for these funds will be paying £50 million as part of its final payment to the government under the terms of its purchase of part of Northern Rock’s business in 2011, with the final payment bringing its total to just over £1 billion. The company has also said that it would look to offer £1,000 worth of shares to each of its 2,800 staff working in the company’s 75 branches.
Virgin Money will not be opening up this IPO to retail clients, and the IG grey market will be one of the few means by which the retail investor will be able to gain exposure. Considering how close previous IG grey markets have been in predicting the opening valuations for companies such as Twitter, Royal Mail and Saga, this will no doubt be a market closely watched by traders and institutions alike.
This year has seen an influx of companies looking to gain exposure to the equity markets; however, of late, investor appetite appears to be waning. Improved competitiveness in the banking sector has been one of the government’s pet projects, with Virgin Money just one of the new ‘challenger’ banks entering the market. In contrast to TSB, Virgin Money expects to begin paying out dividends much earlier in its life as a listed company, providing an additional attraction for investors. With fellow challenger Aldermore planning an IPO as well, the opportunities for investors in the banking sector are about to become more numerous.