Improve Access for Retail Shareholders

Give Growing Companies Better Access to Retail Shareholders to Boost the UK Economy

ShareSoc News Item by Mike Dennis, Director

A recent survey¹ of ShareSoc members was undertaken in conjunction with Aquis Stock Exchange (AQSE) and it has revealed that many individual investors do not feel they have good, equal access to growth stocks.

Key findings of the survey¹

• 55% of individual investors polled feel they don’t have, or aren’t sure they have, good access to growth companies
• Over 80% of respondents feel individual investors should be able to trade shares in any public company they choose, irrespective of the exchange it is on
• Around 50% of respondents commented that they do not believe that they have enough access to IPOs and fundraises
• Individual investors are frustrated about the privileged access afforded to institutional investors, often at discounted prices
• The Primary Bid service is recognised as a welcome improvement in access to IPOs and fundraises but not enough companies are yet using this service
• Respondents feel that the main barriers to investing in smaller growth companies on AQSE are:-

• • Lack of good quality/reliable information
  • Restricted access to trading through the most popular brokers
  • Poor liquidity and large spreads
• Several respondents applauded efforts by AQSE to improve liquidity and transactional costs

Improved investor access will ultimately benefit the UK economy

These systemic problems of access have consequences, not just for the individual investors but for the issuing companies and for the UK economy as a whole.

• Liquidity, spreads, costs and ratings on UK exchanges compare unfavourably with their US equivalents which discourages many companies from seeking listings in the UK market.
• Lack of retail investor access to IPOs and fundraises starves companies of essential growth capital at reasonable cost.

Most respondents to the survey believe that the situation could be significantly ameliorated by making it easier and simpler for retail investors to access IPOs and fundraises and to trade shares in ALL public companies on ALL exchanges.

Regulatory changes will improve access to fundraises

Survey respondents also made many suggestions for regulatory changes that would improve access to IPOs and fundraises – the most common of these were:-

• Removal of or significant increase in the cap of €8m for the retail market
• Radical simplification of the prospectus regs for secondary fundraises to make it easier/less costly for the issuer
• Scrap or reform Mifid2 – which is preventing information availability
• Mandate all IPOs to be made available to retail investors
• Ban the disapplication of pre-emption rights

More brokers are planning to extend coverage

Since carrying out the survey ShareSoc has been informed that AQSE are now in detailed discussions about extended coverage with several mainstream trading platforms. This is a welcome development which will help address some of the highlighted problems. You can find out more from AQSE’s RNS announcement here – https://www.voxmarkets.co.uk/rns/announcement/919858b5-11e6-4b3c-ac43-54c1b19a0950/

What next?

The results from this survey will feed into ShareSoc’s policy development processes and I’d like to thank those members who took the time to respond – your feedback is very valuable to us.

¹The survey was completed by over 450 of ShareSoc’s 7,000 members, in January 2021. Half of the respondents have a significant proportion (>20%) of their portfolios in small caps and two thirds of those with significant small cap portfolios define themselves as experienced investors