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AJ Bell plans stock market float as Woodford sells

AJ Bell plans stock market float as Woodford sells

by William Robins, Dylan Lobo Mar 12, 2018 at 07:45


Fund supermarket and online stock broker AJ Bell has fired the starting gun on its race to join the London Stock Exchange with a flotation pencilled in for the end of the year.

The Manchester-based company says the listing will give its investors and customers, ‘the opportunity to participate in AJ Bell’s future success’ with a special offer for customers to buy the shares.

The group does not intend to raise new capital as part of the initial public offer (IPO) of shares. Its two largest shareholders, co-founder and chief executive Andy Bell and Invesco Perpetual, will both retain ‘cornerstone’ shareholdings following the float.

Fund manager Neil Woodford is no longer an investor having sold his stake, held in the Woodford Equity Income fund and Woodford Patient Capital (WPCT) investment trust to his old employer Invesco Perpetual last month, according to the Financial Times.

Bell (pictured) said: ‘An IPO is a natural next step in our journey and will provide a further boost to our future growth through the increased profile a stock market listing will give us.

‘We believe the outlook for our business is extremely positive. The need for people to save and invest for their future has never been stronger and we are making it easier for them to do that.’

The platform has £42 billion of total assets under administration.
In 2017 revenues grew 17% to £75.6 million and it made a pre-tax profit of £21.7 million. It increased its dividend by 10%, to 28.25p a share, equating to a 66% pay-out ratio.

Bell said: ‘We now have 172,000 customers and I want them to be able to share in our success by giving them exclusive access to the offer.’

Broker Numis Securities has been hired to oversee the process and to recommend whether the flotation should be pushed back to early next year.

Woodford sold its £40 million stake in AJ Bell shortly before the firm announced its intention to float on the market, according to the Financial Times.

According to the paper, Woodford sold the 8% holding in the company to his former employers Invesco Perpetual in February.

Invesco Perpetual now holds around 45% of the company's shares, with stakes in Woodford's former Invesco Perpetual Income and High Income funds, now run by Mark Barnett.

Woodford (pictured) first invested in AJ Bell in 2007 at Invesco Perpetual, before investing again after the launch of his Woodford Equity Income fund and Woodford Patient Capital investment trust.

Meanwhile, Sky News reported Woodford had been unable to participate in a £150 million fundraise at challenger bank Atom.

The sale of the AJ Bell stake and refusal to participate in the Atom fundraising comes as the portion of the Woodford Equity Income fund invested in unquoted stocks has grown to 9.5%. Financial Conduct Authority rules dictates the fund is not allowed to hold more than 10% of its assets in unlisted shares.

This is up from the average 7.5% portfolio weighting to unquoted stocks since the fund's launch, and has grown as outflows have mounted from the fund and some of its biggest listed positions have fallen in value, as Woodford has endured one of the most challenging periods of his fund management career.

Woodford became the ‘cornerstone’ of Atom’s capital base when he backed its launch in 2014, which at the time was the UK’s first digital-only bank.

In order to keep his stake at about 20%, Woodford would have had to pour millions more into Atom in its latest cash call. By deciding not to invest more, his stake has been diluted to 18%, according to a spokesperson.

In a statement, Woodford suggested the disposal of AJ Bell and refusal to participate in the Atom fundraise was not due to liquidity concerns.

‘Neil has to make decisions about the allocation of capital all the time. It has always been our clearly defined strategy to nurture young technology-intensive businesses through the early stages of their development,’ a Woodford spokesperson said.

'In some cases, such as Atom Bank, once those early hurdles have been overcome it is entirely appropriate these businesses raise capital from other investors rather than Woodford. 

‘When we sell, or don’t participate in a funding around, it is not a function of an inability to follow on, but typically a function of our preference to focus our capital on businesses earlier in their lifecycle or which have the potential for more attractive returns.

‘Despite outflows, we have supported follow-on and new funding rounds in more than 20 companies in the past six months, in addition to the recently announced rights issue for Provident Financial (PFG).’

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