Small shareholders have never been particularly popular in the City. Latest example of the disdain they endure is illustrated by the deluge of share flotations with many of them deliberately ignoring the private investor to concentrate on the big battalions that are prepared to order vast chunks of the shares on offer.
Such an attitude is usually dominated by cost factors. It is much cheaper to deal with a few institutions than to offer shares to all-comers. But such an approach is hardly democratic and puts small investors at a distinct disadvantage as they are not able to buy stock until dealings commence – very often at a premium to the issue price.
In the 11 months to the end of February flotations raised more than £28bn. Such a figure could well be exceeded in the months ahead as the queue of companies seeking a presence on the full market or the junior Aim facility seems to grow daily.
True, some newcomers have welcomed us little 'uns. And I don't think they are disappointed with the end result. After all, a consumer-facing business that allows private shareholders to participate - possibly an army of them - must score on all fronts and find any extra cost worthwhile.
There had been hopes that the remarkably successful Royal Mail float, which encouraged private investors, would herald a return to the Thatcher era when Sid and friends were, in effect, invited to take part in a string of privatisations. Private shareholders had never had it so good with the City enjoying a lucrative episode.
And today's attitude is in stark contrast to the postwar years when the Stock Exchange was prepared to circulate a list of stockbrokers willing to act for the small player. I think every stockbroker, with the exception of the (very) blue-blooded, was then prepared to entertain retail investors.
The flotation lock-out is only one of many vicissitudes small investors encounter. They often have to pay excessive dealing costs – particularly if they want paper share certificates – and have to contend with the old boy network that usually ensures they are among the last to get important information.
Their exclusion from many share placings is another bone of contention. At one time a quoted firm raised cash by embarking on a rights issue, open to all shareholders. Rights are still relatively popular, although they now tend to embrace extensive cash calls. When a company, for whatever reason, wants to raise a smallish amount of money it probably opts for a private placing with less than 10 per cent of the enlarged share capital offered. Such exercises, invariably at a discount to the quoted price, are confined to the favoured few, mainly institutions and directors. The small player is left out in the cold.
I have long complained about the unfairness of private placings. They are cheaper and quicker than inviting all shareholders to take part in an open offer. A modest company, I recall, had to fork out £250,000 on an open offer to all. Expensive, yes. But far more equitable than private placings to the privileged few. They should be confined to when a business needs a sudden cash injection or speed is essential.
Lloyds Banking Group, a no-pain, no-gain portfolio constituent, has in the two government-inspired selling exercises resorted to private placings to institutions.
I hope that when the remaining near-25 per cent stake is eventually unloaded the Thatcher inheritance will be restored and private investors will get a look in.