Hargreaves Lansdown says its clients have seen a 200% hike in retail access to follow on offers – but it also says the UK markets regulator, the FCA, needs to do more.
Hargreaves Lansdown clients were able to access 27.3% of transactions so far in 2023, a rise of over 200% since 2021. Last week, the British government published draft legislation to allow the FCA to manage public offers and admissions.
The FCA said last week that it plans to consult on new rules for prospectus reform. But the level of access is still far too low, says Hargreaves Lansdown. The broker is arguing that the FCA needs to put boosting retail investor access at the heart of new listing rules.
Tom Lee, head of trading proposition, Hargreaves Lansdown, said: “Our push for greater access to retail opportunities means our clients are now involved in three times as many follow on offers as they were in 2021. This is a vital step towards building more vibrant markets, and engaged retail investors, but we need more action from the FCA.”
Why is rapid access for retail investors important?
Giving investors speedy access to follow on offers is critical given that so many of these transactions open for such a short time, sometimes as little as a few hours and often after the market has closed. It typically takes providers around 30 minutes to provide access, but in the case of Hargreaves Lansdown, it is live in less than five minutes.
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“We message clients with easy links to be able to take advantage of the offer quickly,” said Lee.
Clients can buy additional shares at a discounted price, free from stamp duty. The firm’s partnerships with four technology platforms mean its clients now have the widest possible access to IPOs, follow-on offers and blocks under the same terms as institutional investors. “This allows shareholders to defend their corner and avoid dilution when a company raises capital,” said Lee.
Hargreaves Lansdown said it is also seeing increased investor engagement through its new digital voting and with the introduction of the Investor Meet service which provides virtual access to AGMs.
Retail appetite for IPOs remains high
Retail investor appetite to access IPOs and deliver long-term, diversified capital to a wide range of corporates remains high, Hargreaves Lansdown said. But there are both market and regulatory barriers which deter companies from offering shares to retail investors. This reduces the overall capital available and can lead to consumer harm where existing retail shareholdings are diluted due to lack of access to secondary capital raisings.
“Politicians, policy-makers and market participants all want to make the UK an attractive place for companies to list and, at the same time, encourage retail investors to invest in high quality assets,” Lee said. “Making it easier for retail investors to access primary markets is a key way for the UK to achieve these twin aims and drive growth and innovation to benefit the UK economy.”
Lee said that as rules around listings are being revisited, tt’s essential that the FCA prioritises improving retail investor access to primary markets. Retail investors should be given parity of access to these markets with institutional investors.
Whilst the route to investing may differ, the reforms should ensure that it is no more burdensome to issue to retail investors than it is to wholesale markets.
