Stop excluding private investors from IPOs, fund platform bosses say


It is time for private investors to stop being excluded from the vast majority of initial public offers (IPOs) in London.

This view, echoing thoughts of small investors for many years, has been put forward to the Treasury by the bosses of the three largest trading platforms, Hargreaves Lansdown, Interactive Investor, AJ Bell.

Recent IPOs of Dr Martens, the Hut Group and Moonpig excluded retail investors, with research indicating that in the three years to October 2020, private investors were locked out 93% of the 352 IPOs on the main market and AIM.

Around 80% of private investors feel they should have access to all IPOs and that it is unfair to exclude them, a survey by Interactive Investor found.

In a letter to the City Minister, John Glen, the heads of the three platforms, whose combined businesses administer assets worth over £200bn for roughly 2mln investors in the UK called on him to consider imposing a regulatory obligation on companies to consider making shares available to smaller investors in all new flotations.

They called for a consultation to be opened on how to provide “fair access to IPOs and not disadvantaged in favour of city institutions”.

“Ultimately it is the boards of companies that control whether their IPO is open to retail investors, but they are currently discouraged to do so by the sponsoring investment banks,” the trio said.

They argued that 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 practicalities of opening up an IPO to retail investors have already been standardised and so the signatories of the letter said there would be no additional ongoing costs or administration for the listed company.

Further, bringing small investors in at the point of flotation gives companies access to an additional source of capital, can help raise the profile of the business and create a healthy shareholder base as most retail investors are long-term holders.

In May last year, a fundraising by Compass Group (LON:CPG) was the first-ever accelerated share placing by a FTSE 100 company to include a retail portion, via a retail investor offer on the PrimaryBid platform.


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