Private investors, not just big institutions, should be allowed to participate in discounted equity fundraisings, according to an open letter from senior figures in the investment industry.

Amid rising concerns that the rights of small investors are being flouted by the current fundraising rush as companies shore up their finances in the wake of the coronavirus crisis, the letter calls on listed firms to make sure their rights are protected by mandating a tranche of shares for retail investors as part of a fundraise.

The letter, co-ordinated by PrimaryBid which is a partner of the London Stock Exchange, also calls on deal advisors to make sure small investors are part of their thinking when structuring a fundraise.

It comes after measures from City regulator the Financial Conduct Authority (FCA) allowed companies to raise capital more quickly, enabling them to issue up to 20% of their share capital without having to give existing shareholders first refusal.

The letter, signed by bosses at companies including AJ Bell (AJB), Fidelity, Standard Life Aberdeen (SLA) and Royal London, as well as senior fund managers at Schroders (SDR), Merian Global Investors and Premier Miton (PMI:AIM), said that while there’s a need for businesses to raise money quickly, ‘we are concerned that no protections are being afforded to retail investors.’

Companies including ASOS (ASC:AIM), Hays (HAS), Hotel Chocolat (HOTC:AIM), Informa (INF), SSP (SSPG) and WH Smith (SMWH) have all issued shares directly to institutional investors at big discounts.


In some cases this means retail investors are missing out significantly. For example, institutional investors and company directors who took part in ASOS’ £247m placing at £15.60 per share have already made a roughly 50% profit, with the company’s share price now standing around £23.60.

The letter adds, ‘Technology exists today to run a retail offer as part of an accelerated fundraise, with no delay to the issuance timeline or impact on pricing. [PrimaryBid], for example, has partnered with London Stock Exchange to do exactly this (at no cost to individual investors).

‘We encourage UK PLCs and their boards to protect individual shareholders and employees by respecting their rights to participate alongside the institutional investors, management teams and board members.’


It continues that including individual investors is ‘more than just good governance’, highlighting the ‘unprecedented support’ small investors have offered UK-listed companies.

In recent weeks, individual investors have represented over 20% of the volume on the FTSE All Share, with 60-74% of this volume being buy orders.

‘They can and should represent a powerful source of funds for listed companies,’ the letter adds.

Disclaimer: AJ Bell is the owner and publisher of Shares.

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Issue Date: 20 Apr 2020