While the Royal Mail Group IPO was one of the most profitable for buyers for many years, it certainly caused a headache for the seller. Ever since it’s been IPO buyers who have had the headaches. High profile dotcom floats like Boohoo, AO World and Just Eat have sagged badly since their post IPO prices shot up, while the Saga float has already dropped 10% in just a few weeks. Given that these latest IPOs worked out pretty badly for investors, most investors could be excused for giving the latest high profile float, of the TSB Banking group, a wide berth. But as we’ll see there are certain reasons for thinking this could be a mistake.
Why is TSB floating?
TSB is being spun off from the Lloyds Banking Group. The European Commission are essentially forcing a sale as a punishment for Lloyds receiving financial help from the government (still 24% shareholders) in the 2008 financial crisis. So the story goes, Lloyds look likely to take a £500m hit on their investment in TSB - ouch!
Whenever you are making a financial purchase, it always pays to buy from a forced seller, so that’s a plus, but beyond this, spinoffs have a reputation for being quite good investments. Joel Greenblatt wrote a great little book called “You can be a stock market genius” in which he mused about the value of ‘spinoffs’. He insisted that “The facts are overwhelming. Stocks of spinoff companies, and even shares of the parent companies that do the spinning off, significantly and consistently outperform the market averages.”
With the huge help of Stockopedia’s Alex Naamani on the numbers, we’ve put together some basic statistics which might help guide investors. Stockopedia won’t receive standardised financials and prices until TSB floats, so we’ve done our best to collate some stats from the prospectus (which you can download here). We are not banking analysts, so please DYOR and feel free to challenge, criticise and debate everything in this article. Think of this as some motivated private investors trying to make sense of the numbers and asking the Stockopedia community for help.
Is TSB cheap?
Mad as it may seem, one of the things prospective IPO investors rarely do is open the prospectus. In TSB’s case, it’s a 330 page document that…
