TOOL hire firm HSS’s shares slid on conditional trading yesterday, in a disappointing launch for the newly-public stock.
Its shares floated at 210p, coming in at the bottom of the price range set by the firm and its advisers. But they quickly started falling, moving as low as 198.25p – a fall of 5.6 per cent – over the course of the day.
Investment bankers JP Morgan had to enter the market to support the price, pushing it back up to 210p by the end of the day.
The weak pricing is a particular disappointment for retail investors, who bought 19 per cent of the shares on offer. Small investors have been offered little in the past year, either being excluded from initial public offerings altogether, or seeing their shares sink rapidly.
Saga’s shares have spent almost all of the past year firmly below the price at which they floated in May 2014, while Card Factory’s stock took five months to crawl back above its opening price.
Even when retail investors had hoped to be included in floats, they were often shut out again in favour of institutional investors.
Pets at Home initially planned to sell 12.5 per cent of its shares to small investors, but cut that back to just three per cent.
And TheTrainline.com had announced plans for a retail segment in its IPO, before choosing to sell to another private equity house instead of going public at all.
The inclusion of a retail segment opens up the flotation to customers and clients of a firm, and can prove popular. However, it also reduces flexibility in the float process.
When only institutions are involved, it is easier to cut the price range if necessary. But when retail investors are involved the price is more fixed, as it takes more time for the larger numbers of small investors to sign up to buy stock.
Several institutional investors are understood to have refused to buy in, arguing the price was too high, but the retail element meant the firm was unable to move lower.
Private equity firm Exponent retained a 50.4 per cent stake in HSS.