Access to Placings for Individual Investors

The FT, 7 June, publishes ShareSoc and the UK Shareholders’ Association joint letter about placings which exclude individual investors. We continue to urge all companies and their brokers and Nomads to allow individual shareholders to participate in placings.

The letter focussed on the recent placing by UKGI of RBS shares and was written by Cliff Weight and Peter Parry. It said:

It is a public disgrace that individual investors have been excluded from the placing by UK Government Investments Limited (“UKGI”) of RBS shares at 271p. It should be easy to reserve a proportion for those smaller shareholders wishing to participate in the placing.

The RBS share price was trading in the 290p to 295p range before the leak of the impending sale, which conveniently manipulated the share price down, resulting in a group of institutional shareholders being able to buy 925 million shares at a discount of 20p to the previous price, i.e. £180 million.

On this occasion small shareholders could have bought in the market on the day the placing was announced at 266p, so have not lost out by being excluded from the placing. Nevertheless, it is difficult to justify a non-public placing. The real reason open offers aren’t included is that the institutions taking up the placing don’t like them and want exclusive access to cheap shares and it is less work for the corporate broker – money for old rope.