The Scottish insurer Standard Life got away to a flying start on its stock market debut yesterday, with its shares closing up more than 5 per cent at 242.5p.
The float, the biggest to take place in London since Dimension Data's £6bn listing in 2000, saw the company draw a line under more than 80 years as a mutual organisation.
Having issued its shares at 230p - at the bottom of its 210p-to-270p proposed price range - the stock was bid up as high as 245p in the first two hours of trading, before falling back to close up 12.5p, giving it a market value of £4.9bn. The stock was the most heavily traded in the UK market, with trading volumes reaching 166 million by yesterday evening.
"It was priced to go, ultimately," said Gary Jones, a fund manager at Aberdeen Asset Management. "They knew it was going to happen, they had to get it away, and it was priced at the right levels. From where [the shares] are now, they'll probably stay around these levels or stronger."
The float brings to an end the first stage of a complete overhaul of Standard Life, which began almost two and a half years ago when the company's capital shortfall was exposed.
Since Sandy Crombie took the reins as chief executive in April 2004, the group has cut thousands of jobs - for the first time in its history - cut the commissions which it pays to advisers, and focused its efforts on its most profitable lines of business.
The group raised £1.1bn via the flotation, which it intends to use to shore up its capital position and to grow the business. At its current market value, it is trading roughly in line with its embedded value - a key industry measure of life insurers' value. Its other listed UK-focused rivals, Legal & General and Friends Provident, trade at about 1.1 and 1.3 times embedded value respectively.
Mark Durling, an analyst at Brewin Dolphin, said the group was not yet in as good a shape as its main UK competitors. "Standard Life still has to prove itself over the next six to nine months," he said. "Its earnings record is just starting to improve."
In May, the group revealed that it had made first-quarter profits of £30m, compared with profits of £33m for the whole of 2005.
The float's success will come as a relief to Mr Crombie who was forced to consider cancelling the listing last month, after two months of tumbling equity markets. However, the chief executive was reluctant to pull the float, opting instead to slash the proposed price range from 240p-290p - a 12 per cent cut at the bottom end of the range. UK equity markets have recovered slightly. The FTSE 100 is down less than 4 per cent from its five-year high, set in April, of 6,137.1.Reuse content