Egg sets market opening price at 160p

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The Independent Online

The flotation of Egg, the internet bank subsidiary of Prudential, was almost 10 times oversubscribed, the insurer said yesterday, as it unveiled the starting share price.

The flotation of Egg, the internet bank subsidiary of Prudential, was almost 10 times oversubscribed, the insurer said yesterday, as it unveiled the starting share price.

The loss-making bank will be priced at 160p a share when it begins trading today, giving Egg a market capitalisation of £1.3bn. This is towards the top of the original range of 130p to 175p a share. At that price, the flotation will raise £236m before expenses, of which Egg will receive about £150m and Prudential £86m.

More than 85,000 customers and employees applied for shares worth a total of about £70m. Prudential, which used Goldman Sachs as global co-ordinator for the issue, said it had scaled back the retail offer to 35 million shares, or £55m, about one-quarter of the total share capital on offer.

Private investors who applied for shares worth £200 or £500 will have their applications met in full, while those who applied for £1,000 will have their applications scaled back to £752. Customers who applied for shares will be notified by e-mail from today.

Institutional investors, whose applications were also scaled back, took the remaining £181m. The global offer consists of 147 million shares, representing about 20 per cent of the total business.

The £1.3bn valuation is less than half the forecasts of up to £4bn for made in February, before the worldwide correction in technology stocks forced some companies to delay their flotations.

There has also been negative sentiment over internet flotations in the wake of lastminute.com's much-hyped public offer, which left investors nursing losses.

Egg decided to go ahead with its plans, despite some scepticism about its prospects. Yesterday one broker said the price was too high, but that unsatisfied demand for shares from both institutions and private investors could push the price up to as much as 170p in early trading.

Justin Urquhart Stewart of Barclays Stockbrokers said: "I think 160p is fairly high, and I would have preferred to see Egg shares priced at around 140p to 145p. What concerns me is that this is still a business which has a very limited track record and has not yet made a profit. There is a danger that despite an initial flurry of enthusiasm, the company may be overpricing itself and end up with egg on its face," said Mr Urquhart Stewart.

Egg's chief executive, Mike Harris, said the offer had been designed to avoid retail investors' applications being scaled back substantially, and this had been achieved. "By allocating a little bit more than we intended we avoided substantial scale backs," he said.

Prudential chief executive Jonathan Bloomer said the success of the initial public offering validated Egg's business model. "We had very strong demand from the UK, Europe and the US," he said.

Mr Bloomer said Prudential intended to keep its remaining holding in Egg for the long term. Egg, which was set up two years ago, made a £150m loss last year and is not expected to break even until the end of 2001. The bank had so-called "first mover" advantage by setting up ahead of most rivals. But others are now muscling in, including established banks such as Abbey National and Halifax.

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