Lloyds prices TSB IPO well below book value - UPDATE

Lloyds' shares slipped on Monday morning after the company disappointed the market with details of the flotation of its TSB business, priced well below book value.Lloyds said it would sell a 25% stake in TSB by offloading 125m shares, setting the price of the initial public offering (IPO) at between 220p-290p.At the mid-point of the price range, TSB's market capitalisation would be approximately £1.275bn, compared with the book value of the business of £1.6bn.Mike van Dulken, Head of Research at Accendo Markets, said that the 3-25% discount to book value "will have got investors thinking"."Either it's a bargain or it's a sign," he said.Ahead of Monday's statement, press reports suggested that 30% of TSB could have been offered in the IPO, up from Lloyds' original announcement of its intention to sell 25%, suggesting that demand was strong.However, van Dulken said that demand for further issuances in London may have been "dented" after a wave of activity earlier in 2014. He highlighted the recently-pulled IPO of retailer Fat Face, currency group Travelex opting for a private sale, and "muted debuts" from newly-listed Saga and Game Digital.Van Dulken said: "Is TSB's pricing indicative of the IPO wave being close to breaking and the promise of a 1 free share for every 20 (so long as you hold for a year) not just designed to offset the lack of dividend for three years but also engineer some of the share price stability lacking in so many recent listings?"Final pricing is expected to be announced on or around June 20th 2014, with conditional dealings in TSB shares beginning on the London Stock Exchange on the same day, Lloyds said. Lloyds was trading 1.2% lower at 79.16p by 10:23 on Monday.BC