In the back
platform and SIPP administration
business AJ Bell will also offer its
shares to customers who have opened
an account by 15 October.
This raises the first point about IPOs.
The City is a powerful place and one of
the top-two destinations in the world
to raise money via a flotation, with
institutional investors tending to hog
all of the shares in the most promising
companies. Private investors rarely
get a look-in as offering shares to this
demographic adds an expensive layer
of complexity. And why would you
bother if the investment banks and
pension funds can buy all the stock?
So, when an IPO comes along that
private investors can participate in,
surely there must be something wrong
with this particular company? If the
investment professionals don’t want
the stock, you have to ask yourself why?
If only it were that simple, because
some companies want to encourage
private investors as new shareholders,
even though it’s expensive and
difficult to do.
Look at it this way: if all of a
listed company’s stock is held by
institutions in large blocks, when
one of these investors sells it can
have a hugely detrimental impact
on the share price. When lots of
small private investors are buying
PERFORMANCE OF STOCK SINCE IPO
160,000
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
Another reason to invite
private investors to
participate in your share
offering is to form a closer
bond with customers
and selling a company’s shares, it
provides liquidity which typically has
a beneficial effect on the share price.
Another reason to invite private
investors to participate in your share
offering is to form a closer bond
with customers. Take investment
platforms, for instance. They tend to
have tens of thousands of customers
who can be a pretty disloyal
bunch, sensitive to
service issues and price rises. But if I
were a customer and a shareholder,
I would certainly think twice
about leaving a service that I had a
commercial interest in.
This same rule applies across
many other industries, with some
companies offering shareholder perks
to incentivise and align customers
and shareholders.
What types of IPOs
are offered on platforms?
In addition to the standard shares
and funds available on investment
platforms, many offer the chance to
participate in retail IPOs. There are
typically two different types.
• Investment trusts
• Government sales and high-profile
flotations (for example Saga and
one day, possibly, Lloyds Bank)
HargreavesLansdown (£152,351)
[ PLATFORMS & PENSIONS ]
44 / 45
A quick whizz around the
Hargreaves Lansdown, Interactive
Investor, Charles Stanley Direct
and AJ Bell websites demonstrates
this pattern. There are half a dozen
new investment trusts looking to
raise money from the public
(late September 2018), falling
broadly into two categories.
First, there are “standard
issue” investment trusts,
Source: FE Analytics
FE TRUSTNET
trustnet.com