The UK government finally announced last week that it has decided to push ahead with the retail offer ofthe remaining shares in Lloyds (LSE: LLOY).
So, what do we know about the offer?
Well, we know that the government is planning to sell at least 2bn worth of shares in the offering, which is scheduled to take place next spring. Those who keep hold of their allocation for more than a year will receive one bonus share for every ten shares held.
Bonus shares will be granted up to a value of 200. The shares will be offered to the public at a discount of 5% to the market price.
All in all, based on current prices for an investment of 1,000, including the 5% discount, investors will be able to buy 1,382 shares, with a market value of 1,053. The bonus share scheme means that if investors hold onto these shares for a year without selling, theyll be entitled to a further 138 shares with a market value of 105.
Including the gain from buying the shares at a discount, and the bonus shares, in year one investors could be in line for a total profit of 15.8% assuming all other factors remains unchanged.
On top of this theres Lloyds dividend potential to consider. City analysts expect the company to pay 2.52p per share during 2016, which works out as an extra 35 for investors holding throughout the year. This hikes the total possible gain in year one to 19.3%.
Of course, if Lloydss share price falls or rises over this period, the capital gain could vary significantly.
With such attractive returns on offer, thousands of investors across the country have already registered their interest in the retail offer. Its reported that 250,000 have already signed up for the offer five times the number that registered to buy shares when Royal Mail was sold off.
But with 2bn of shares up for grabs, theres still plenty for everyone. Still, investors buying shares worth less than 1,000 will be given priority and due to the 200 limit on bonus shares, the potential 19.3% return available in the first year starts to fall if investors buy more than 2,000 worth of stock.
Buy and hold
Were long-term investors here at the Motley Fool. Buying shares for a quick profit isnt really our cup of tea. So, what are Lloyds long-term prospects like?
Well, the banks recovery is nearing an end, and as Lloyds puts the mistakes of the past behind it, City analysts expect the company to start throwing off cash during the next few years.
City figures suggest that Lloydscould return 20bn to 25bn to shareholders over the next three years. These numbers suggest that Lloyds shares could hit 125p by 2017, excluding dividends. Including potential dividend payouts, Lloyds total return will bein the region of 84% by 2017.
Whats more, the banks return on equity a measure of bank profitability hit a sector high of 16.2% during the first half of 2015. Also, Lloyds capital cushion is 11% above the level required by regulators.
The bottom line
Overall, for both long- and short-term investors the Lloyds retail share offering looks like a rare opportunity thats worth taking advantage of.
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