AJ Bell and Hargreaves Lansdown to bring IPOs to retail investors

Rick Steves

“Some 87% of all London listed companies which have raised money over the last 25 years have excluded ordinary investors despite the significant growth in retail investing in recent years.”

In a nod to the UK government and its intention to further the rights of retail investors, AJ Bell and Hargreaves Lansdown have launched a new retail share offer service to improve access to IPOs and ABB secondary fundraisings.

The new service was launched to help companies open up to retail investors, both at IPO and for follow-on capital raisings, and is designed as a compelling and accessible proposition that UK-based publicly listed companies will find increasingly difficult to justify ignoring.

Most UK PLCs exclude ordinary investors from fundraisers

While there has been significant growth in the numbers of retail investors in the market in recent times, the majority of London-listed companies raising money exclude ordinary investors.

The new retail offer service through REX changes that by enabling existing retail shareholders to participate in ABBs through their brokers in their dealing account (general investment account, ISA, SIPP, etc).

The service will also open up wider participation for retail investors in IPOs, who have accessed just 21 of the 182 IPOs between October 2020 and now.

Andy Bell, chief executive at AJ Bell: “The growing number of engaged retail investors in the UK should be viewed as an attractive source of capital for any company considering an IPO. The majority of them will be long-term shareholders investing via their pension or ISA and this can help create a healthy and diverse shareholder base. Many of them will also be customers of the listing company which can help generate further brand loyalty and deepen the customer relationship.

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. This ignores the benefits of shareholder diversification, brand awareness and customer loyalty that can be gained by including retail investors in an IPO.”

Chris Hill, Chief Executive Officer at Hargreaves Lansdown: “Some 87% of all London listed companies which have raised money over the last 25 years have excluded ordinary investors despite the significant growth in retail investing in recent years. 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.”

The announcement outlined how an accelerated book build (ABB) or retail offer works in five bullet points:

• If a London listed company chooses to conduct an ABB or IPO Retail Offer through this service, clients will be notified by their broker
• For ABBs, time is short and notification is usually the same day that instructions need to be placed
• Clients will be notified of the offer so they can then login to their online account to place an instruction
• Applications for ABBs will typically open after the market closes and close later that evening.
• Brokers will only allow existing shareholders to use this service to avoid more speculative trading

Read this next

Retail FX

Lion launches multi-currency trading accounts powered by AI

The core advantages of multi-currency trading account services include enabling significant cost savings and higher efficiency for investors.

Inside View, Interviews

Interview: Stanislav Bunimovich on Finalto’s white label solution

To explore what makes Finalto’s white-label solutions stand out in such an incredibly competitive market, Finalto sat down with its Chief Operating Officer, Stanislav Bunimovich, for an interview. 

Digital Assets

Talos acquired Cloudwall for a better portfolio management system

Cloudwall’s additional expertise in portfolio risk systems further positions Talos at the forefront of portfolio management systems across spot, futures, perps, and options.

Digital Assets

Bybit’s Bitcoin market share explodes, up by 400%

“This milestone is a testament to our sharp trading products and the loyalty of our users. As the industry evolves, Bybit remains at the forefront, ready to set new standards in the crypto trading world.”

Crypto Insider

Why Self-Custody is the Key to Secure Crypto Trading

Crypto trading is fast gaining popularity; as of writing, the total market capitalization stands at $2.3 trillion, double what it was at the onset of the 2021 bull market.

Industry News

UK FCA sues Lee Steven Maggs for FX scam Kube Trading

‘Kube Trading’ allegedly received around £2.67 million for FX trading and concealed significant losses from investors.

Market News

AUD/USD Soars Following Inflation Report

Australia’s CPI surge hints at prolonged tight monetary policy. Watch the Aussie dollar as US economic data looms.

Institutional FX

GCEX reports drop in turnover in 2023 due to crypto winter

“The crypto winter had a huge impact across the industry, and GCEX was no exception. However, in response to the decline in revenue, we have been resilient and adaptive, navigating our costs effectively and diversifying revenue streams such as introducing staking services for institutional and professional clients.”

Institutional FX

FxGrow taps Integral’s SaaS brokerage workflow

“FxGrow’s decision to partner with us is indicative of the growing advantage for brokers to leverage tier-one institutional-grade technology while maintaining control over their own platform. Integral is well-positioned to provide the SaaS solutions that will enable these businesses to better compete in the market.”

<