UPDATE: Investment Platforms Go To Bat For Retail Shareholders In IPOs

(Alliance News) - Bosses at Hargreaves Lansdown PLC, AJ Bell PLC and Interactive Investor ...

Alliance News 22 February, 2021 | 9:08AM
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(Alliance News) - Bosses at Hargreaves Lansdown PLC, AJ Bell PLC and Interactive Investor Services Ltd on Thursday called on the UK government to ensure the ability of retail investors to participate in initial public offerings.

Hargreaves Lansdown Chief Executive Chris Hill, AJ Bell CEO Andy Bell and Interactive Investor CEO Richard Wilson co-sent a letter to Jon Glen, economic secretary to the UK Treasury and City Minister, calling on him "to consider the rights of retail shareholders in relation to IPOs".

The heads of the three companies wrote to Glen last week asking that he consider forcing companies to consider retail offers in new flotations, as well as the opening of a wider consultation on the subject.

The letter pointed to "recent high-profile examples" of retail investor exclusion from the recent IPOs of online personalised cards and gifts retailer Moonpig Group PLC, boot maker Dr Martens PLC and Hut Group owner THG PLC.

In all three cases, share prices for the companies rose to an instant premium to the IPO price, forcing private investors to pay higher prices than the institutions that took part in the IPO.

The directors suggested a consultation on how retail investors might be given fair IPO access "and not disadvantages in favour of city institutions".

"Part of this debate should be around whether there needs to be a regulatory obligation on companies coming to market to consider a retail element to their IPO. Currently there is a danger that this only happens when the company and its advisers suspect there will be weak demand for the IPO," the letter said.

It also noted that regulatory change would "take time" and called for boards, chairs, and CEOs considering London Stock Exchange listings, well as company advisers, "to ensure a proportion of the shares offered through their IPOs are made available to UK retail investors".

The retail investment platforms highlighted that while company boards control whether or not their IPOs are open to retail investors "they are currently discouraged to do so by the sponsoring investment banks".

Between October 2017 and October 2020, the letter said, private investors were only invited to participate in 24 out of 352 London Main Market and AIM IPOs, meaning exclusion from 93% of share launches.

"Retail investors should have as much right as any other institution to invest at IPO, rather than having to 'get in line' and potentially buy the shares at a premium in the open market, post IPO," the letter argued.

The Times reported on the story on Monday and spoke to Interactive Investor boss Wilson, who called the current system "a closed shop" and accused it of "choking the capital-creation process".

He also said that Interactive Investor would be sure to include a retail offer in a floatation, which Wilson believed was "likely", as AJ Bell had done in its own 2018 IPO.


By Anna Farley; annafarley@alliancenews.com

Copyright 2021 Alliance News Limited. All Rights Reserved.

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Securities Mentioned in Article

Security Name Price Change (%) Morningstar
Dr. Martens PLC Ordinary Shares 493.60 GBX 2.07 -
AJ Bell PLC 460.20 GBX 1.23 -
Hargreaves Lansdown PLC 1,658.50 GBX -0.81 -
Moonpig Group PLC Ordinary Shares 438.80 GBX -0.27 -

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