The initial public offering (IPO) of the Buffettology Smaller Companies investment trust has been pulled after it failed to raise the £100 million minimum needed for a stock market float.
The trust, which planned to follow legendary investor Warren Buffett’s investment style, said that despite receiving a ‘broad level of support from a significant number of investors’, it has decided not to proceed with the initial issue at the current time, with overall demand for its shares not sufficient to meet the minimum proceeds set out in its IPO prospectus.
The cancelled plans come as something of a surprise as strong demand had been expected for the Sanford DeLand-run trust, given the track record of Sanford DeLand’s other funds.
Its CFP SDL UK Buffettology Fund (BF0LDZ3) has achieved 26% total return over the past three years and its Free Spirit Fund (BYYQC27) has achieved a 38.8% total return over the same period, both top quartile performances according to FE Fundinfo.
The move comes after the Tellworth British Recovery and Growth trust pulled its IPO last month after also failing to generate enough interest.
SENTIMENT TOWARDS UK AT ‘LOW EBB’
Laith Khalaf, financial analyst at AJ Bell, said the pulled launch comes as sentiment towards the UK market is ‘at a low ebb’, with a resurgence of coronavirus cases further undermining confidence.
He said, ‘Smaller companies tend to beat their big blue chip rivals over the long term, but it’s understandable investors see them as being at the sharp end of any impending economic trauma.
‘The Buffettology focus on quality companies should have provided some downside protection on that front, but that’s academic now.’
TWO DOWN, ONE TO GO
With the Tellworth and Buffettology IPOs now scrapped, it’s a case of two down and one to go as investors await a prospectus from the Schroder British Opportunities trust which also announced its intention to float.
Khalaf said, ‘Schroders has the benefit of a bigger distribution network than the boutique operators Tellworth and Sanford DeLand, but it looks like it’s facing an uphill battle to pull money in, and the failure of a second IPO will no doubt give Schroders pause for thought.’
