Hargreaves Lansdown flotation

questor_2

Rhino666 wrote: »

Hargreaves have announced their intention to float 25% of the company in the near future. They have already offered large investors a chunk of the cake and are now testing the water with people like me who have vantage accounts with them.

The offer is for a share investment from £5k up to a maximum of £25k. HL are smart cookies when it comes to timing and opportunities and around now would seem the ideal time to maximise their income from a float.

Has anyone else been offered an opportunity to invest ?
Will anyone be supporting this flotation ?
Does anyone have an opinion as to the wisdom of investing in HL at this time ?

Hi Rhino666,

I registered just now especially to discuss this flotation.

Both SL(54) and PH(60) are very smart cookies, indeed. I have been a client for a long time and have been invited to invest as have my son.

I have even deposited a substantial sum of money with them to apply, should I so decide. But, as yet, I have NOT applied.

There are far too many question marks over the issue. I have now read all the available comments, inc. IC and of course the 180-page long prospectus, which makes frightening reading.

I think I shall apply for NONE.

Will post again after some more cogitation.

Regards.

Questor.

questor_2

Grey_Squirrel wrote: »

I am undecided on whether to apply for the offer. I have read the prospectus, looking for a compelling reason to invest, but I have not found it yet. I was hoping that we "privileged" clients might be offered some incentive such as a discount.......but, sadly, this is NOT the case. So, we're in the market, along with everyone else, not much to gain for a hopeful punt except saving on stamp duty and dealing charges. Unless, of course, the institutional investors force the price down.

Unfortunately, this is happening at a time when the markets generally are riding high on the back of M & A rumours, and I, personally, are expecting an imminent correction.

Just to add something to what Browntrout had to say.......
According to the prospectus HL are looking for a minimum of 39,526,575 shares allocated to the Qualifying Offer ( clients and employees ). That's a third of the total shares on offer. That offer would be fully subscribed if 11,857 people each invested £5000 ( assuming a mid price of 150p). That's less than 4% of the client base of 350,000.

I have read that the company has been valued at 14 times the projected earnings for 2009, which is fair enough I suppose, but the present price seems too high to me.

At the moment The Times suggests that the P/E ratio is 19, but they recommend subscribing long term on the basis of improving returns.

Today's Working Lunch had a few moments on the subject, and suggested it might be a better idea to buy in the secondary market, not the IPO. Food for thought.

Before investing I usually ask myself whether this is the BEST I can do with my money. I'm not sure about this one.

Since all of the monies raised are going straight into the pockets of Mr. H and Mr. L and a few other senior managers, I'm sure they will not go hungry, and I'm wondering what appetite will remain for the business.....but I APPLAUD them for their success.

Unfortunately they have not presented their clients with offer they cannot refuse, although I'd love to support them and the best of luck to all who do.

Hi grey squirrel,

Like you I and my wife have been clients of HL for many years. They have been inundating me with their mail and continuoual exhortations to buy, buy, buy. It really has been overwhelming for years and years. That's why I have not gone over to HL completely, preferring to keep my stock trading business with a very established on-line broker.

But I did take out some SIPP and some ISA's with H-L. I agree with you that they have been quite supportive.

However, the question is about this offer.

The prospectus is very heavy and DEPRESSING reading. For example:

year ending June 2006, Net profit = £7.6M after one-off DIRECTOR'S REMUNERATION OF £19.6M. Quite a big pay cheque for M/s SL and PH.

No commitment whatsoever, for the offer price to be even within the range 140-160p/share, could be higher or lower. Seems that M/s SL and PH are giving themselves a VERY WIDE latitude while, giving the punters(that's us) NONE. Once an application is made, that's it! No come-back, no guarantee. Even if they fix the price at 200 or 300p/share, tough. You are IN.:eek:

That is if you are a client. Institutional Investors have a choice, they simply have to indicate how many shares they want at what price (or range). Very canny.

The employees can apply in multiples of £1000. So your comment about everyone applying for £5,000 only applies for NON-employees.

Re: Company valuation: Adjusted earnings for year ending June, 2006 = £24.3M.
(after adjusting for one-off payments to director's SL & PH of £19.6M)

@150p/share company is valued at £711M ie ~ 30 x Historic earnings.:mad:

This is pricey, VERY PRICEY INDEED, and the IC said so.

IC did not say "Buy". It said "with such solid earnings prospects, the shares LOOK ATTRACTIVE."

QWhat else can they say?

H-L has been voted by IC readers as a top broker, more than once, I believe. Similarly by Which?

IC cannot just turn around and say "Don't buy!"

Future prospects: EXPECTED pre-tax profits in year-ending June 2009, = £50M.

IF that profit materialises, then and ONLY THEN the p/e ratio drops to 15.;)

This is airy-fairy land. The markets are very high right now. What happens to the p/e ratio if the markets fall and the stock brokers and financial service providers take a tumble?

They are not exactly defensive stocks are they? :rolleyes:

No, I am going to steer very clear!

I believe the Institutions will drive a very hard bargain and force the price down.

Then there could be a take-over. But that's unlikely in the near future.

So a very questionable buy at this time, except for the long term and possibly on the prospects of a potential take-over!

Regards.

Questor.

Grey_Squirrel

Thanks questor,

I agree with you on most of your points, but I do not think that the offer price will exceed 160p ( It's too high at 140p anyway!).

There is a provision in the prospectus which would allow a clent to withdraw their agreement to subscribe if the Offer Price is materially different than the indicated range of 140-160p.......as defined by "Section 87G FSMA", which would require HL to produce a supplementary prospectus. I must confess I do not know what Section 87G FSMA is, but, yes, it's daunting enough trying to digest 180 pages of the prospectus, without having also to understand government regulations.

...... However, not to be beaten, I've just "googled" '87G FSMA' and it came up with The Prospectus Regulations 2005. There is mention there of material or significant changes that require the production of a supplementary prospectus. But no definition of what 'significant' is, so not a lot of use really!

Regards

questor_2

Thank you grey squirrel,

for your response. As it happens, I agree with you completely.

I do not believe that HL would dare to exceed 160p offer price. I only put in that point to illustrate the unusual and extremely wide latitude HL has given itself, while restricting the latitude of the investors as much as they could.

Take the manner of subscribing, for example. I have subscribed to mant New Issues and probably will in future. Almost without exception, the issuer has accepted a cheque drawn on a UK Bank, to accompany the application.

But, not H-L. WHY? I am sure they could provide plenty of rationalisations. But the fact remains that the method they chose maximises the material gain to them and penalises the applicant.

For what it's worth, here's my crystal ball. Mind you it might be cloudy!

Offer price 155 -160 p/share.

Institutions but at 120 - 130 p/share or lower.

Price when public dealings start = 140-150 p/share.

Might fall thereafter.

Insttitutions start mopping up loose shares, as they can (and some not so loose).

When one predator has accumulated enough, it makes a move. May not be until 2009 or 2010.

Share price moves upwards and investors see real growth, at last!

But I stress, this is only my guess. No one knows for sure.

What I do know is that there are shares right now which do meet Fool's criteria of

P/e not above 10, or not by much.
Solid and dependable earnings growth
Yield 4% or higher
Company valuation below 1.5 x NAV or at most 2.0 x.

Add to that the current precarious state of the market, and the question naturally arises, why buy into H-L. It's just another share, rather pricey and NOT a defensive stock.

Regards.

Questor.

Midnight_Cowboy_2

Although HL could in theory breach the indicated price range, they wouldn't do it; what would be the point in upsetting a large number of customers?

However, I see no reason not to expect a price at the top end of the range. If someon agreed to buy something off me at a range of prices, which one would I choose? The highest one, obviously!

Re predictions, here's my tuppence worth:

Price will be top end of range, 155-160p (maybe 155 so they don't look like they're fleecing their clients). This is also the grey market price, and I would expect it to start trading around here.

Once floated, there will be no massive rush, and the price will drift around over the summer. That high P/E may push the price down to more reasonable levels.

The price may well pick up though prior to September when the institutions are forced to start buying in readiness for it entering the FTSE mid-250. After that... well, who knows? Even my crystal ball's not that good! All depends on good year-ends. It will also be interesting to see how the dividend pans out. The best hope though is that this company will be ripe for takeover when a big player wants quick entry into the wrap market.

baby_boomer

Rhino666 wrote: »

HL are smart cookies when it comes to timing and opportunities

You mean that old lag Peter Hargreaves has just turned 60 .

Liz_the_Whizz

The more I read, the more I doubt I will be investing.

It feels a bit too much like the current Harry Enfield character "I saw you coming" who puts up the price of the pretentious tat he sells when he sees a gullible customer approach.

At present, I can see no price incentive to buy, in fact the value may well fall short-term. And while I might have had a go with £1k, £5k is more than I feel comfortable with in any single investment.

But the thread has been great with lots of advice from those who clearly know far more about how to pick shares than I do. Keep it coming, I've still got three days to do a 180

olivert

midnight cowboy,i read your views about a possble foreign takeover with interest.hargreaves reminds of two investment houses which were quickly snapped up when they went public.one was called mercury asset management which got taken over by merrill lynch.the other was called jupiter,it was run by john duffield and i think it was taken over by the deutsche bank.the latte rseems to have a lot in common with hargreaves

mutley74

Well I have applied for the offer and paid up my money in preparation. I decided to do it know before I either miss the offer by forgetting to have the cash available or some other event makes me sceptical over it.
The times rated it as a buy last week and the IC is optimistic about it too.

I have quite confident of HL business generally and happy with the customer service, all except their sky high share dealing charges.

Midnight_Cowboy_2

olivert wrote: »

midnight cowboy,i read your views about a possble foreign takeover with interest.hargreaves reminds of two investment houses which were quickly snapped up when they went public.one was called mercury asset management which got taken over by merrill lynch.the other was called jupiter,it was run by john duffield and i think it was taken over by the deutsche bank.the latte rseems to have a lot in common with hargreaves

Hi I would say it is ripe for takeover, but not neccessarily by a foreign company. Any UK company looking for a quick way into the wrap market might be tempted tho. From what I can tell (and from the company where I work), investment players are falling over themselves trying to get wrap products into the marketplace. They are pretty complex as they need to have feeds from multiple institutions; hence, they're slow to set up. Buying a company 'off the shelf' with the technology is certainly an easy way in.