Platforms unite in call for IPO review

Platforms unite in call for IPO review

Three of the UK’s largest trading platforms have called for a consultation into IPOs, saying retail investors should be given fair access to public offerings.

The chief executives of AJ Bell, Hargreaves Lansdown and Interactive Investor published an open letter to John Glen, economic secretary to the Treasury and city minister, saying retail investors were a growing market but were "excluded from the majority of IPOs via the LSE".

They wrote: "For too long UK listings have been the preserve of financial institutions and we urge you to consider the rights of retail shareholders in relation to IPOs."

Proposals for review made by the group included a consultation on how retail investors are given fair access to IPOs and not disadvantaged in favour of city institutions.

They wrote: "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 noted that between October 2017 and October 2020, private investors were invited to take part in just 24 out of 352 IPOs on the main market and AIM, only 7 per cent of all share launches.

They were excluded from the recent IPOs of Dr Martens PLC, Moonpig PLC and Hut Group owner THG PLC.

The platforms said as most of new retail investors managed their portfolios via investment platforms they could benefit from quick and easy access to IPOs.

A recent survey by Interactive Investor found that 80 per cent of DIY investors felt that private investors should have access to all IPOs, and that it was unfair to exclude them.

The D2C platform had asked 2,008 website visitors on February 8 and 9 and found one in five respondents believed there was an IPO “bubble”.

The letter also alleges that retail investors are shut out of from participating in IPOs due to the dominance of transactions “between City institutions behind closed doors" and accuses investment banks of forcing retail investors to “get in line” and potentially buy the shares at a premium in the open market, post IPO.

In 2018, signatory AJ Bell included a retail offering in its IPO.

Tom Higgins is a freelance writer for FTAdviser