In an effort to democratise the investing process, the broker and investment platform provider’s largest shareholders, Invesco Perpetual and founder Bell (pictured), will reduce their holdings in the firm from 44% to 25% and 28% to 25%, respectively, but will remain key investors in the business.
The news comes less than a month after the investment platform’s third largest shareholder, Neil Woodford, decided to offload his 8% stake to Invesco Perpetual and Bell.
Invesco Perpetual would have needed to cut the size of its stake in time for the IPO regardless because of current restrictions around total voting rights in publicly-listed companies.
Public takeover rules in the UK state that when a shareholder acquires the interests in shares carrying 30% or more of the total voting rights, they must either dump some of their shares or make a formal takeover bid.
After purchasing a portion of the £40m shares Woodford ditched before AJ Bell confirmed its intention to float, Invesco Perpetual owned a 44% stake in the business, making it the largest shareholder, followed by Bell who owned 28% of the firm.
Speaking with the Financial Times, Bell said his planned 3% drop, alongside Invesco Perpetual’s expected 19% cut, was all about democratising investing by offering AJ Bell customers the opportunity to purchase shares in the business. As the firm will not be raising any new money for the planned float, the pair’s decision to sell down their stakes will free up shares for other investors to snap up.
Bell has yet to specify the portion of shares that will be available to its 172,000 retail customers.
“Our customers believe in the business. If you believe in a business you want to get into that business as early as possible,” he told the paper.
“Too many flotations feel like ‘jobs for the boys’ where the investment banks and fund managers look after each other. Many customers have asked us about buying shares and now they will get a chance.”
AJ Bell is expected to be valued at £500m when it floats on the London Stock Exchange late this year or early next year, roughly 17 times its expected pre-tax profit for 2018. The firm is already doling out an annual dividend of 28p per share.
Last month, Bell described the proposed IPO as a “natural next step in our journey” that will boost future growth through raising the company’s public profile.
Bell told the Financial Times he sees further room to boost profits because of a “wall of money” coming from people who are turning away from traditional fund managers.
“The platform market is growing faster than ever. Some is new money but a lot of money is coming from old style insurance company policies. They are too expensive,” he said.
According to Bell, the firm’s customer numbers are growing by 25% a year, and he expects the platform industry’s share of UK retail savings to increase from 35% of a £1.5trn market in 2015 to 55% of a £2.2trn market by 2020.
