All investors matter.
That was the title of an open letter, posted back in April by app-based retail platform PrimaryBid to the boards and managements of UK companies, then pouring out emergency capital raisings in a desperate effort to re-enforce their balance sheets at the height of the first Covid panic.
Retail investors were being excluded from these, even though they accounted for 20% of secondary turnover in the FTSE All-share index, with anywhere from 60% to 74% of that being buy orders.
Those equity raises typically priced at discounts to already beaten down share prices.
But as soon as they were completed – in some cases, as soon as they were announced – and balance sheet safety secured, share prices could soar by 20% or 30%.
Boards are very focused on protecting existing shareholders. But they need to manage a trade-off between perfect pre-emption rights and reducing exposure to market risk and volatility in a capital raising - Nick Koemtzopoulos, Credit Suisse
The capital markets hedge funds made out, selling to retail brokers for a quick buck.
