Get on board a float, says HARVEY JONES

September 30, 2018
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It is also down to the fact that Aston Martin is 007’s choice of motor manufacturer, while AJ Bell is looking to repeat the success of independent financial adviser Hargreaves Lansdown, whose shares have rocketed since it floated in 2007.

A good IPO can catch the public imagination, as happened with Royal Mail’s heavily oversubscribed IPO in October 2013.

Shares were initially priced at 330p, but soared almost 40 per cent to 455p on the first day of trading on the London Stock Exchange (LSE), giving investors who sold an instant profit.

So should the prospect of investing in an IPO float your boat?

Float on

Last year was big for IPOs, with more than 100 listing on the LSE, raising £14.8billion, a rise of more than 50 per cent on 2016 and more than anywhere else in Europe. The Aston Martin IPO is closed to private investors, although they will be able to start trading the stock immediately afterwards on the secondary market.

The shares can inject a spot of movie glamour into your portfolio and Lee Wild, head of equity strategy at Interactive Investor, said this is now a fantastic business supplying a growing market for premium motors: “Its shares are more affordable than its supercars and might even turn a profit, if the business hits its ambitious targets.”

The AJ Bell flotation is likely to whip up more investor interest, because this is open to the public. It has been compared to Hargreaves Lansdown, a similar but much larger operation, which had a market cap of around £700million when it floated, but is now a FTSE 100 stalwart worth £10.7billion.

Investors have seen their shares soar from the IPO price of £1.62 to £22.56 today, turning £1,000 into £13,920, with dividends on top.

On offer

AJ Bell aims to float on the main London market in December or early 2019, but private investors who want to apply for shares must open an account with the company by October 15 this year.

You can invest tax efficiently through an Isa, Lifetime Isa, or self-invested personal pension, from a minimum of £1,000, with the maximum amount depending on demand levels.

Chief executive Andy Bell said IPOs are traditionally done behind closed doors, with retail investors rarely getting access to the flotation price of the shares: “As a company that aims to make investing easy for people, this did not feel like the right approach for us.”

Shares in peer-to-peer lender Funding Circle started trading on Friday and there could be more familiar names in the pipeline.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: “Price comparison site CompareTheMarket.com, mobile operator O2, Sky Betting & Gaming, and the UK’s largest vehicle manufacturer Jaguar Land Rover are all rumoured to be launching IPOs at some point.”

Snail Mail

Adrian Lowcock, head of personal investing at Willis Owen, said IPOs can be great buying opportunities, but like all investments, there are risks attached: “Many floats come with a lot of hype and it is not always easy to separate that from the opportunity itself.”

Kames Capital investment manager Elaine Morgan said look for a strong management team that has been successfully managing the business for a reasonable time, has an established target market and “skin in the game”: “This means top managers are also partial owners of the business, providing alignment with other shareholders.”

The big danger is that the IPO hullabaloo can quickly fade, as happened with Royal Mail.

After topping 600p in January 2014, it now trades at around 480p. The initial public excitement does not always last.



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