AJ Bell and Hargreaves Lansdown launch service to give ordinary investors better access to IPOs and follow-on fundraising rounds
- Everyday investors have been shut out of the vast majority of IPOs
- AJ Bell and Hargreaves Lansdown hope to improve access
- The new service will include IPOs and follow on capital raisings
Everyday investors remain largely shut out of initial public offerings and follow on fundraising, according to two leading brokers who have this week launched a new service to improve access.
There have been a series of high profile listings in London during the pandemic, from Deliveroo to Oxford Nanopore, but most have excluded everyday investors.
To combat this AJ Bell and Hargreaves Lansdown launched a new retail share offer service to improve access to IPOs and secondary fundraising markets.
Left out in the cold: Everyday investors have been shut out of the vast majority of listings in London
‘The hope is that as more companies seek to open up to retail investors, both at IPO and for follow-on capital raisings, this new service will be a compelling and accessible proposition that UK plc will find increasingly difficult to justify ignoring,’ the brokers said.
Brokers have long campaigned for increased access for everyday investors.
Last year Interactive Investor, which has also been pushing for better access to IPOs, said that without the investment trust sector the number of IPOs available to retail buyers would be minimal.
Dr Martens, Moonpig, Oxford Nanopore Technologies and Deliveroo all left everyday investors out in the cold.
Since October 2020, ordinary investors have had access to just 21 of 182 IPOs.
‘One of the problems is that companies are dissuaded from including a retail element in their IPO by their financial advisers because it is easier and quicker for them to place shares with the institutions that they know,’ said AJ Bell boss Andy Bell.
How will it work?
- If a listed company launches an ABB or IPO Retail Offer clients will be notified by their broker so they can login and place an instruction
- You will usually receive a notification on the same day as the ABB. It will typically often after the market closes and close later that evening
- Brokers will only allow existing shareholders to use the service
‘This ignores the benefits of shareholder diversification, brand awareness and customer loyalty that can be gained by including retail investors in an IPO.’
AJ Bell and Hargreaves Lansdown claim their new offering, which will be powered by REX, will make it easier for companies to connect with investors.
The new share offer service will also help ordinary investors participate in fundraisings conducted by way of ‘Accelerated Book Build’ (ABB) through their brokers in their general investment account, Isa or Sipp.
Chris Hill, chief executive of Hargreaves Lansdown, said: ‘Existing investors miss the opportunity to buy additional shares at a discounted price and free from stamp duty and the transaction results in their existing shareholdings being diluted, a loss of value through no fault of their own. This has to change.
‘There has been some progress from the Government to support the retail investors.
‘However, we are not there yet, and we are acutely aware that it is UK plc that still holds many of the cards around retail access to IPOs, company fundraisings, and the preservation of pre-emption rights.’