Speculation on the future of HMV has been rife for months, since EMI launched a radical reorganisation in the face of sagging results.

The sales downturn came amid mounting investor concern over the company's ability to service its debts.

Last year, EMI tried to merge first with Warner Music and then with German media giant Bertelsmann, but both proposed tie-ups fell through.

Employee opportunities

Mr Giles, said the flotation was "an important milestone" and said it would reward employees by by giving them an oppotunity to buy shares.

Shares will be sold to institutional investors in the UK and internationally, as well as private UK investors and company staff.

Analysts expect the flotation to raise up to �600m, and praised the timing.

"The IPO market is starting to recover, and consumer spending hasn't slowed down yet," explained one fund manager.

Most of the money raised will be used to reduce debt, with the remainder used to grow the chain and revamp the Waterstones outlets.