When Severn Trent tapped shareholders for £250m to fund green projects in May, the placing went ahead with little fanfare.
But one component that set the capital raising apart from others was its decision to include a retail offering.
Severn Trent’s rationale was straightforward: it wanted to give individual investors the same opportunity to participate as larger institutional backers.
At the time, chief executive Liv Garfield said: “Treating all investors fairly is fundamental to our corporate governance commitment and we were delighted to include a retail component to our fundraising to give everyone the same opportunity to participate.”
Retail participation such as this has been almost non-existent in UK listings over the past few decades. That, however, has begun to change, partly thanks to a rapidly growing platform known as PrimaryBid.
Created by ex-banker Anand Sambasivan, PrimaryBid has given businesses such as Severn Trent, PensionBee, Ocado, Deliveroo and Compass, the opportunity to include their stakeholders in their fundraisings.
Its timing could hardly be better. In the wake of Lord Jonathan Hill’s review of the UK’s capital markets, ministers have been looking for ways to include wider participation in the ownership of public companies.
Sambasivan says he can help achieve this by giving some power back to ordinary investors.
“One thing that was clear to me throughout my career was how dislocated access was between individuals and institutions, and how the institutions could capture value in public markets but individuals couldn’t,” he says.
“It irked me because these are public markets. It didn’t seem fair that when a company raised capital at a discounted price, that was offered only to institutions.”
PrimaryBid uses an app to send push notifications to its users when a business is using its platform to raise money. It then allows them to buy shares on the same terms as institutional investors.
PrimaryBid was created by ex-banker Anand Sambasivan
Credit: DANIEL GARRIDO MORALES
There are no fees for customers to use the service. Instead PrimaryBid gets paid by the issuing companies, based on the amount of money that it raises for them.
The app has faced some technical issues when trying to process high levels of demand, which Sambasivan acknowledges and refers to as “growing pains”.
But that hasn’t stopped him from rapidly expanding. Last month, the company announced plans to launch in France. It also has its eyes set firmly on the US.
The 41-year-old’s global ambitions reflect his own international upbringing. He was born to a middle class family in Bombay in India, spent most of his childhood in Singapore, went to university in the US and became a British citizen in 2016. He has worked as investment banker at Bank of America and Credit Suisse in both New York and London before launching PrimaryBid in 2016.
The founder says that getting any listed companies, let alone major ones, to include a retail offering was difficult during PrimaryBid’s first three years, but the huge number of recapitalisations that took place in the midst of the pandemic spurred a wave of new interest.
The company has been involved in more than 160 deals to date, including nearly 70 already this year. Headcount has jumped from 15 in March 2020 to 130 today, and its platform has more than 200,000 subscribers.
Its biggest backers include the London Stock Exchange Group (LSEG), Draper Esprit, Fidelity and venture capital firms PenTech and Outward.
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“We’re not a confrontational business,” says Sambasivan. “Our whole goal is to make it seamless for the banks to integrate with us. It’s not a conflict, we actually get brought in by the banks.”
He adds that feedback from City fund managers has been positive as getting retail investors involved early in the process helps to build liquidity and allows for quicker price discovery – a point which is echoed by other City sources.
But there are some concerns that the high levels of retail participation in the market over the past year have been driven by pandemic-induced boredom, increased levels of savings and stimulus in the economy. So could PrimaryBid merely be a fad?
Charlie Walker, head of primary markets at LSEG, thinks higher levels of retail involvement is here to stay. He points out that the UK has comparatively very low levels of retail participation compared to other major markets such as the US.
In Chinese markets, for example, 90pc of liquidity comes from retail investors. “So this isn’t necessarily a UK trend, this is something we’re seeing happening around the world,” he says.
Sambasivan says PrimaryBid is currently ploughing money into growth and its main goal is to break into new markets:
“If we wanted to, we could be a profitable company today, but our story is not nearly done yet.”