Direct Line shares rise on debut Investors who ignored bearish commentary about the prospects for Direct Line were enjoying an early paper profit on Thursday after the shares rallied as much as 5.7 per cent on their debut trading session. Royal Bank of Scotland priced its insurance arm at 175p, close to the middle of an original range of between 160p and 195p. The shares opened 3.4 per cent higher and by mid-morning in London they were up 9p or 5.1 per cent, at 184p, giving the home and motor insurer a market capitalisation of £2.76bn. RBS sold a stake of 30 per cent of the equity in the first tranche, raising about £787m for the part-nationalised lender. With a so-called greenshoe option, banks handling the deal are able to increase this to 34.5 per cent over the next two weeks subject to demand. About 25,000 individual investors applied to take part and took up about 15 per cent of the shares offered. The shareholder register is not expected to be made public for several days. However, people with knowledge of the flotation said funds based in North America were set to take a higher share than usual for a European IPO. The 175p price gave Direct Line a dividend yield of about 7.5 per cent and valued the insurer at about 1.1 times its tangible book value. This represented a discount to several peers such as RSA, which trades on 1.7 times. "These are attractive metrics," said one fund manager at an institution that is expected to become one of the insurer's biggest shareholders. It is rare that the buyer in an IPO has leverage over the seller, but with RBS a forced seller this is one of those times. The retail allocation is the biggest for a London IPO since that of Hargreaves Lansdown in 2007, people familiar with the matter said. The bank raised an estimated £118m from the public. Paul Geddes, chief executive of Direct Line, said: "We are delighted with the level of demand institutional and retail investors have shown in Direct Line Group, reflecting the recognition of our clear strategy and key strengths of distribution, scale and market leading brands. We look forward to life as a publicly listed company with the support of a strong and diverse shareholder base. The performance of the shares on their debut are being closely watched, with bankers regarding the offer as a test of investor sentiment.