At 4.36pm on 10 August, industrial thread manufacturer Coats (COA) announced its second acquisition in as many months. Not only was this unusual behaviour in that Coats rarely buys companies, but it also asked retail investors for financial help.

Historically Coats has relied upon bank debt for financing and used that money, along with internally generated cash, for deals.

The fact retail investors were offered a chance to buy shares at a discount to the market price is important. It shows how Coats as a business has found new momentum and appetite for strategic acquisitions. Perhaps more significant is that it is one of a growing number of companies treating retail investors with more respect.

Letting retail investors take part in share placings means institutional investors are no longer getting preferred treatment. Having a level playing field has long been desired by smaller investors, and technology is helping to achieve this goal.

Coats used the new REX fundraising platform which is owned by Peel Hunt (PEEL:AIM), the broker and corporate financier. It is very similar to the share placing facility offered by PrimaryBid.

Customers of various investment platforms including AJ Bell receive an alert when one of their portfolio holdings is doing a share placing open to retail investors. The recipient must decide if they want to buy more shares or have their stake in the business diluted.

Investors typically have a short period – often just an hour – to apply for shares in the placing. They are either told the price in advance, or as we saw with the Coats deal, they place an order, and the price is agreed once the placing is done.

While this greater opportunity to take part in placings is a good step forward, it is by no means perfect. Most of the placings happen after the stock market is closed for the day, so any retail investor without cash in their ISA or SIPP cannot sell an existing position in a different stock to raise money to fund their share placing application.

There is the odd exception. Take TV producer Zinc Media (ZIN:AIM) which ran a placing including a retail investor component during market hours on 3 August.

If you’re not paying attention to messages from your investment platform provider, or studying the stock market announcements like a hawk, it’s easy to miss the placing opportunity. No-one is going to proactively phone a retail investor like a broker might do with institutional clients to alert them.

The take-up of recent retail offers hasn’t been exceptional. For example, Coats only raised £433,103 from retail investors, and Zinc Media got £37,059 from this audience. That might be partially explained by the placings having happened during the quiet period when investors were on the beach.

What should be applauded is the fact the placings were offered to retail investors in the first place. It aligns with a push by the Government to make retail investors a more important source of funding for companies, so it might be worth checking your messages just after 4.30pm each day, as you never know which opportunity has come knocking.

DISCLAIMER: AJ Bell referenced in this article owns Shares magazine. The author (Daniel Coatsworth) and editor (Tom Sieber) of this article own shares in AJ Bell.

‹ Previous2022-08-18Next ›