Glittering prizes one step nearer for smaller investors

There are signs a range of web-based services could help open up the newly-issued shares market
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The Independent Online

Newly-issued shares can mean an instant profit - as high-profile flotations in the technology sector have shown. But actually getting hold of these glittering prizes can be hard. Many initial share offerings are placed directly in the hands of large institutions, without giving retail investors a look in.

But there are signs that the internet could help open this market up. New initial public offerings or IPOs are now becoming more accessible to smaller investors, thanks to a range of web-based services.

Traditionally, merchant banks arranging IPOs prefer to place the shares with institutions because the administration of the deal is far simpler. But increasingly, companies trying to raise capital now appear to recognise the value of attracting smaller investors. "There's been an awakening of interest, although it probably hasn't developed as fast as it might," says Jeremy King, head of personal investment at ProShare, an organisation which aims to promote share ownership.

New internet IPO marketplaces which are springing up appear to be a welcome way for companies to reach private investors. For just over a year, German company Publity has run a web-site in Germany giving investors the opportunity to buy shares in a variety of IPOs brokered not by it, but by different financial institutions. And it has now launched a site in the UK, hoping to deliver the first IPO in the summer.

A Swedish venture, epo.com, has a site up and running in the UK which now offers information on current and upcoming IPOs and how to apply. It says it aims to become an online investment bank for EPOs - electronic public offerings. Issuesdirect, part of share registry IRG, is an established web-site which gives investors one-stop access to IPOs.

Stockbrokers are already in on the action. London-based Durlacher, an investment bank specialising in internet start-ups, recently launched an online-trading service offering access to IPOs. But like Issues Direct, Publity promises to offer shares brokered and arranged by a wide range of institutions, rather than being limited to its own issues.

Jens Oenicke, director of content and communications at Publity, says the companies issuing the shares, and therefore the banks they engage to arrange the IPOs, are not just interested in raising money, but "smart money" in particular. "Not only do they want institutional investors, but they also want clever retail investors who understand their business," he says. And epo.com, on its site, points out that private investors often help boost the liquidity of a company's shares. Larger institutions by their nature tend to hold larger stakes, which can mean the stock as a whole becomes less liquid, and therefore less attractive to investors. So raising new capital would be that much harder.

From the private investor's point of view, Harriet Brooke of stockbrokers Teather & Greenwood says the new internet service of the type offered by Publity could be just what is needed. "Retail investors need to have access to more IPOs which up till now have been quite closed," she says.

"There clearly is a real desire amongst private investors to have access to IPOs and information, it is very difficult to know what is going on," says Mr King, who points to web-site Digitallook.co.uk as one useful source of information for would-be IPO investors.

The recent IPO from lastminute.com angered many investors because of the way the shares were eventually allocated. So oversubscribed was the issue that individual investors were allotted an amount so small it was not worth selling them. Mr Oenicke says: "We try only to work together with securities houses who make their policy transparent. You should always allocate shares in a way that makes economic sense."

But while the new electronic platforms offer hope of democratising IPOs, the whole system still needs improvement, critics say. The way issues are allocated is often unsatisfactory, says Mr King, and many recent new issues of shares, particularly in internet-related businesses, have only floated 20 per cent of their equity. The remainder has stayed in the hands of the founders.

ProShare: 0171 220 1730; Teather & Greenwood: 0171 426 9000

www.epo.com

www.issuesdirect.com

www.publity.co.uk

www.digitallook.co.uk

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