Redmayne-Bentley Investment Column: The guest list – how to take part when new companies come to market
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YOU may think the old exclusivity adage of ‘If your name’s not down you’re not coming in’ is usually reserved for clubs and parties, but no! It also applies to the stock market. When new companies come to market they can choose whether or not to make their offer available to institutional clients, for example pension funds and unit trusts, or retail clients such as you and me, or both. The increased protection afforded to retail clients means that additional paperwork must be produced for a retail offer, which in turn pushes up the costs. The volume of business from the retail sector is often small in comparison to the large institutions some of whom are investing on behalf of multi-million pound funds and therefore retail clients are sometimes excluded because the impact of missing them out in terms of the funds raised is limited. Despite this, some offers are targeted specifically at retail clients. This year’s issue of the Tesco 5.2% retail bond (see Investment Column Tension, Tulips and Technology from 14th January) was aimed directly at retail clients, with lower minimum investment sizes and plenty of explanatory information. Younger, less developed, companies, which often list on the Alternative Investment Market (AIM) due to the more relaxed admission requirements and lower costs, will usually aim to keep their costs down further by offering shares to institutions only. But those that are aiming for a main market listing and especially those going into the FTSE 100 make the offer available to retail clients more frequently. However, one recent exception to this is Glencore, one of the world’s leading integrated producers and marketers of commodities. Its operations include the production, sourcing, processing, refining, transporting, storage, financing and supply of metals and minerals, energy products and agricultural products worldwide. When issued it will be the largest ever initial public offering (IPO) in London and the third largest in Europe. It will be large enough to go straight into the FTSE 100 and will make a billionaire of its chief executive who is selling down his stake as part of the offer. Despite this, the offer is being made to institutional clients only. Having been a partnership for many years, with the associated privacy this affords, the firm has been criticised for a lack of transparency about its financial affairs in advance of the flotation. The available pertinent information is contained within a 1,600 page prospectus which cannot be distributed to retail clients. They will have to wait until the stock begins to trade ‘when issued’ on 19th May (meaning that at this stage it could still be pulled) or 24th May unconditionally, before they can buy (these dates may be subject to change). The one alternative route is through a discretionary managed account with a stockbroker, who may be able to apply as an institution on behalf of their discretionary clients. There are still limitations – a discretionary managed account is usually a long-term arrangement and so it is unlikely you can sign-up to an agreement just to take part; only selected brokers may be able to take part; the minimum investment amounts for a discretionary agreement may be too high; and although you may like the sound of the new company your discretionary manager may not or may consider the risks inappropriate for your circumstances and therefore may not invest. However, to get your name on that guest list you have to be in that discretionary ‘club’. or further details on our discretionary service please go to www.redmayne.co.uk/investment If you would like to be kept up to date with details of other new issues, including details of how to apply when appropriate, then request to be added to our IPO mailing list my emailing your name, address and preferred contact email to info@redmayne.co.uk More articles in
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