Small shareholders are being ‘robbed’ by a City rule blocking them from investing in shares worth billions of pounds in the pandemic.
Between March and October, 664 firms on the London Stock Exchange issued new shares to shore up their balance sheets.
‘Robbed’: Between March and October, 664 firms on the London Stock Exchange issued new shares to shore up their balance sheets
But industry data shows that individual shareholders were blocked from around a third of these cash calls, which raised about £20billion in total.
Companies can allow small shareholders to opt in to capital fundraisings by switching on so-called ‘pre-emption rights’.
But firms – including the insurer Hiscox, Asos and the recruiter Hays – did not include retail investors in the cash calls, meaning small shareholders’ stakes were automatically diluted, and they lost out on the chance to buy shares at a discount.
Richard Wilson, chief executive of investment platform Interactive Investor, called it ‘daylight robbery’ and said that he is lobbying the industry body Pimfa, the Law Commission and the Financial Conduct Authority to reform the rules.
He said: ‘It is nailed-on wrong that other shareholders can put more money in at a cheaper price and dilute the value of retailer investors’ holdings without their consent.
‘The vast majority of UK plc is ultimately owned by the UK taxpayer – whether through an intermediary, a pension fund or directly held shares. But we are bypassing their interests, and other parties get the money.’
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