CITY AND SUBURBAN
Bogus budgies, feathered nests we need a better way to sell shares
CHRISTOPHER FILDES
Ihope you got your morning paper on Tuesday. That was the day of the Trustee Savings Banks prospectus. Normally, when a newspaper carries the prospectus for a popular offer of shares, it will print extra copies to supply the casual readers who will buy the paper to fill in the application form. Certainly, nothing has been spared to make the TSB issue popular. This time, though, the papers carrying the prospectus were asked to hold back their print-runs. The TSB issue's managers must be the first advertisers ever to ask for an artificially restrained circulation. This singular re- quest has an explanation to match. The idea was to make it harder to apply for TSB shares — harder, that is, for those who send in multiple applications, applying in their own names and also in the names of their wives, children, aunts, cats and budgies. Such applications on the frontiers of law (children legal, budgies outlawed) are supposed to be sternly weeded out: watch for the stock newsreel shots of the handwriting experts in action. It would be a low-flying budgie, though, which turned up its beak at the change, given that the application form is described by Neil Col- lins in the Telegraph as the nearest thing his paper would publish to a £100 voucher, exchangeable for cash with only a mod- icum of effort. Do not blame the budgie, or the circulation departments, but blame the City's automatic reliance on its standard system of selling shares — even when the results are patently absurd. A laudable purpose of the TSB issue is to place as many shares as possible in the hands of individuals, many of whom will be first- time shareholders, and to give preference to regular customers of the bank. The price is pitched low to attract them, and the ration of shares they are likely to get, a hundred pounds' worth in their partly paid form, is within the pocket money of any- one who should own a share at all. When dealings begin, the investment institutions will set out to buy the shares which they could not get through the offer for sale. The market now expects them to bid a price which will show holders an instant profit, and might well double their money. Hence the £100 voucher. Why not cash it in? The reward for resisting is a loyalty bonus — one free share for every ten you own, if you sit tight for three years. Your disloyalty bonus by contrast can be yours in three minutes. I do not doubt that in the event, masses of small investors will buy their packet of TSB shares and put it behind the clock on the mantelpiece. The offer, though, gives the advantage to those who take a quick turn. The sensible way to bring small investors in and keep them would be to offer them a deal — preferen- tial rights to apply, restricted rights to sell. They might receive a special class of shares which could not, for a fixed period, be sold. The same restriction is cheerfully accepted, as the price of a tax break, to employee shareholders under the Govern- ment's incentive scheme. Why is it never applied to employees of a company which is coming to market? Such companies, like the TSB, give preferential application forms ('pink forms') to their staffs. Is that to encourage them to invest in their com- pany? Or to reward the financially sophisti- cated who apply for the maximum and sell on the first morning? The City's financial engineers could put these things right if they set their minds to it, but their minds have not been set. The sad truth is that the City is used to its conventional offers for sale, and knows how to operate them. They may not suit the vendor, who can find them an elaborate, prolonged and costly method of striking a price which is at once contradicted in the market. They suit the City, though. Underwriting a new issue will, in the TSB's case, make City institu- tions the easiest £12 million they have ever seen. Stagging a new issue (that is, going for the quick turn) is a game where the edge lies with the City individual, who can listen to the market, take action at the last minute, and rely on an understanding City bank manager who knows the ropes and will cover his cheques. We are now approaching the biggest new issue of all, British Gas, and little time remains for the new thinking that is needed. Printing fewer vouchers for budgies does not qualify as new thinking.
Previous page
