Shares in Britain's biggest telephone-based stockbroker, ShareLink Investment Services, rose 14 per cent to 204p yesterday as it revealed it was in preliminary talks with a bidder.
ShareLink's founder, David Jones, refused to say who was in the frame. But City analysts suggest the US's second-biggest discount stockbroker, Fidelity, is favourite to buy the company. Fidelity's rival, Charles Schwab, America's biggest execution-only equities broker, has also been named.
A sale could value ShareLink at £50m compared with its £42m market value when it came to the market just over a year ago.
Sources close to the talks suggest a building society is also interested. ShareLink already provides stockbroking services to Halifax and Nationwide, as well as to Abbey National and Harrods Bank. None was willing to comment.
ShareLink has been hit hard by small investors' loss of enthusiasm for equities, as 1993's boom markets and BT3 were replaced by choppier waters last year. Volumes have picked up in the last few weeks, however, and analysts suggest this may be a good time for Mr Jones to get a good price for the business just over a year after floating.
The company warned last autumn that it would go into the red, and confirmed this in November with a first-half loss of £468,000. The shares were originally floated at 250p, rose to a high of 420p and then fell to just 176p following the half-year results to 30 September. The market initially put the latest rally down to a recovery in share-dealing volumes.
Yesterday ShareLink announced that "it is in preliminary discussions which may or may not lead to an offer being made for the whole of the issue share capital of ShareLink at a modest premium to the current share price of 200p. A further announcement will be made in due course."
The company has been hampered by the need for heavy investment, including £700,000 on new systems in the last half-year alone. Mr Jones has stressed the need to diversify away from the execution-only service into PEPs and other investment services. Analysts are forecasting a profit of about £500,000 for the full year.
Several building societies have already gone into cut-price stockbroking, led by Yorkshire.