First Active shareholders advised to hang on

Members of First Active who received free shares as part of the flotation of the former building society are being advised to…

Members of First Active who received free shares as part of the flotation of the former building society are being advised to hold on to their shares for the time being.

Those who opted to take cash for their shares immediately had to accept the disappointing £2.25 per share issue price, which proved substantially lower than the level at which First Active began trading in the Dublin and London markets on Tuesday.

That figure of £2.25 was also some 40p less than the lowest guideline price indicated by First Active ahead of flotation.

Given the relatively low price at which the shares were issued, shareholders stand to gain the maximum benefits from any improvement in market conditions and the expected solid long-term growth of the company which analysts are forecasting.

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At £2.25 each, the major insurance companies and investment groups all subscribed to buy the shares, which they believe were issued at a knock-down price.

Their clients, who have long-term investments such as pension funds, should also enjoy healthy investment gains over the long term.

Investors who have benefited from the demutualisation of the Irish Permanent and Norwich Union have mainly held onto their shares. Norwich Union estimates that around 80 per cent of its Irish policyholders who got shares last year still have them, while some 60 per cent of Irish Permanent members have also kept their shares. Both stocks have been performing strongly.