5th October 2015
The government is gearing up to sell-off £2bn worth of shares in Lloyds to the retail market at a cut price rate.
The Treasury said in an announcement on Monday that it would sell its remaining 13% stake in the bank over the coming months.
Members of the public will be offered a discount of 5% of the market price, with a bonus share for every 10 shares for those who hold their investment for more than a year.
The value of the bonus share incentive will be capped at £200 per investor. People applying for investments of less than £1,000 will be prioritised.
All proceeds from share sales will be used to pay down the national debt.
HM Treasury has also launched a dedicated campaign webpage for potential investors, where members of the public can pre-register and receive email updates about the sale. This can be found at www.gov.uk/lloydsshares.
Lloyds was bailed out by the government back in 2008 during the financial crisis when it received a cash injection of £20.5bn. The Treasury originally had a 43% stake in the bank but it has since been offloading its holding by selling shares to institutional investors.
Speaking to LBC, the Chancellor George Osborne said: “We all remember Lloyds Bank was bailed out by the last labour government. We’ve been getting ourselves out of owning Lloyds.
“We’re going to sell shares to the general public at a discount and we will favour the small investors. if you hold onto your shares you will get a bonus, to create long-term investment. It is going to be the biggest privatisation in 20 years. Every penny is going to be used to pay down the debt.”
Laith Khalaf, senior analyst, Hargreaves Lansdown believes “wild horses couldn’t drag investors away from this share sale”, especially given the discounted price and the dividend stream Lloyds is expected to start churning out.
He said: “Pensioners in particular are likely to respond to a trusted high street brand with a decent yield when interest rates are so low. Lloyds is already the most popular share held by our clients who have taken advantage of the new pension freedoms to invest rather than buy an annuity. Next year’s share sale is likely to attract even more silver savers to the bank’s cause.
“High profile public offerings like this one are also an effective way to get first-time investors to save for their future. When Royal Mail floated in 2013, more than a quarter of those who applied for shares said it was their first stock market investment.”
Following the news, shares in Lloyds were up 1.07p or 1% to 77.62p by 08:25am.