Retail investors are worth courting – Editor’s Letter
London’s been having a pretty good time of things as far as raising money for newly listed companies is concerned.
So far this year 99 floats on the London Stock Exchange and the junior Alternative Investment Market have raised a total of £10.4bn, up from £8.7bn last year and only £2.5bn in 2012 when the market was almost closed, according to figures from Hargeaves Lansdown.
However, the excitement from the early part of the year has largely fizzled out as the months have worn on. The usual summer lull in August was extended into September as the marketing campaigns for a number of floats were delayed due to the uncertainties posed by the vote for Scottish independence.
Then the roadside services group RAC decided against floating, preferring to agree a partial trade sale instead and last Friday Miller Homes pulled its flotation. Today will see whether Investec has managed to get the flotation of Gamma, a telecoms group, over the line, after extending its closing date last week.
The big problem for those wanting to execute floats right now, including a big and popular brand like Virgin Money, is that the huge issuance in the first half of the year has left the institutional market sated.
Compounding this is the fact that a number of floats, such as Saga and Card Factory, left a bad taste in the mouth as they were priced at the top of expectations.
Which makes it such a shame that the bank advisers working on new issues have taken such a dim view of letting retail investors join in. Virgin Money’s decision to restrict its sale of new shares to institutions is especially disappointing since it is a company that surely would have attracted a large retail following.