Prudential is to defy the market scare over dot.com stocks and press on with the flotation of its loss-making Egg banking subsidiary, albeit at a reduced price.

While the market had been expecting Egg to be valued at £1.5bn to £2bn after the share sale, analysts said yesterday they expected £1.5bn to become the upper end of the price range.

As Pru insisted that the flotation was "proceeding as planned," it began to run into controversy over its intention to let only customers and employees buy shares over the internet with a debit card.

The insurer, which clarified its position after speculation that the deal was in jeopardy, intends to issue a prospectus by the end of the week.

The document will be scrutinised for an indicative price range for the share sale, further details of when Egg might break into profit, and the terms under which Mike Harris, the bank's founder, and his management team have been locked in.

Egg has already promised to give its 1,400 employees £100 of free shares as well as £900 in options but has yet to reveal any longer-term bonus schemes for its senior staff.

They are expected to be generously rewarded as the Pru, which is expected to retain 80% ownership of the banking unit, has already admitted that one of the reasons for the share sale is to make it easier to retain staff.

To avoid the problems over pricing and demand for shares incurred by Lastminute.com, Pru is conducting the share sale over the internet and restricting purchases to applicants who have debit cards. To cope with potential demand, Pru is restricting the share sale to £1,000 for the 1m customers of Egg and Pru bank and all of its employees and will accept applications only over the internet.

Industry sources believe that Goldman Sachs, which is advising Pru on the flotation, has decided to proceed with the share sale after receiving indications of sufficient demand from institutional investors.

Pricing the shares is expected to be more difficult than usual given the volatility of the market for technology shares, which is languishing at half its record high of three months ago.

One leading analyst said that the Pru would be more concerned if it failed to incur enough demand for shares, rather than the amount of money it stood to raise.