Inside Track: In Barclays we trust: Retail investors rely on bank for new issues
@hellierd
There’s a page on the Barclays website that directs customers to the joys of investing in new issues and flotations. It is headlined: “Access investments before they become available on the market.”
The trouble is that unless Barclays itself is working on one of the current crop of share issues, it is highly likely that retail investors will be excluded from getting in at the start.
In recent weeks, the electrical retailer AO World, the discount shop Poundland and the online food takeaway group Just-Eat have all excluded retail from their flotations. So, when the share price in AO World popped more than 30 per cent on the first day of trading, there wasn’t a single retail investor there to benefit from the instant premium. By the time private investors could buy shares in the market they had already missed much of the fun.
Last year when the flotation of Royal Mail attracted 750,000 retail investors, there was excited talk about their return to the market on a regular basis.
Many hoped for the rekindling of the stock market spirit of the 1980s when the Thatcher government privatised a host of state-owned assets and sold them in what was known as mass retail offerings. There was significant retail interest in Direct Line, in Infinis, a renewable energy group, and then Merlin, the owner of the London Eye and other attractions, all Barclays’ clients.
But the subsequent follow through has been disappointing. For most of the big bulge bracket banks, such as JP Morgan, Morgan Stanley, Goldman Sachs and Bank of America Merrill Lynch, there is not a huge amount of time for the retail offering. “The problem is that they are cumbersome and unless the stock is a real ‘name’, it doesn’t always add enough demand to be worth the pain,” one banker said to me, while another pointed to the inflexibility of a retail issue.
Pets at Home did include a retail element in its flotation recently, and 2,500 employees bought shares in the issue, but the feedback from bankers on the deal is mixed as to whether the deal benefited from their presence.
Barclays is the one large bank that is truly committed to the retail investor and would almost certainly argue for their presence if it gets the mandate to work on any of the Saga, Zoopla, EE, DFS or Lloyds issues that are lined up.
Many argue that the whole economy benefits from large, more liquid stock markets that are available to retail investors. It’s one reason why the prosperity of Barclays’ investment bank is more critical than one might think.
david.hellier@cityam.com