Do you currently invest in stocks and shares or are interested in doing so? Have you ever seen the news that a company has filed for an IPO (Initial Public Offering) and wanted to take part but had to wait until the first day of trading. Only to find the share price had surged due to high demand, pricing you out of the market? Wouldn’t you like to take part in these on the same favourable terms as the big banks and investment houses? Luckily there is a solution to this issue. With a platform called PrimaryBid which helps to put the smaller investor on an equal footing to the big players.
Sometimes companies raise capital by way of a share placing where they sell new shares. Smaller investors often don’t get to take part in these placings on the same terms as big institutional investors. These are the large investment banks and asset management companies. Large investors get the option to purchase shares in the company at a favourable price before the shares begin trading on a stock exchange.
You have probably seen with a lot of IPOs, when the shares begin trading publicly for the first time there is a high demand and the share price surges. This is particularly common with popular technology stocks. It is not uncommon to see their share prices more than double as soon as they begin trading. As well as the company valuation there are also trading fees and taxes that you have to take into account when purchasing shares. All of this can put the smaller investor at a great disadvantage.
So What Is PrimaryBid?
PrimaryBid is a financial technology platform that connects publicly listed companies with individual investors when raising capital. Their mission statement is to ‘enhance fairness, inclusivity and transparency in capital markets’. They have a partnership with the London Stock Exchange and Euronext to help individual investors participate in UK capital markets. They are regulated by the FCA (Financial Conduct Authority). Until recently PrimaryBid was only available in the UK but has since launched in France as well. At present only residents of the UK and France can use the platform to invest. There are expansion plans in place to launch in other countries in future.
If you’re a UK investor you might find the below post on ISAs useful.
How Does PrimaryBid Work?
Once you have created your account you will need to go to your profile. From here, add your broker details where you want any shares transferred to. When logged in you are able to see the dashboard which displays all the latest and recently closed offers. You can see this in in the screenshot below.
You can see the ticker symbol of the company, the sector it operates in, the price of the offer and any discount to the current market price. If you find one that interests you then you can click on it to view further information. From here, the investment prospectus can be viewed. This document outline details of why the company is raising capital and what purpose it intends to use it for.
A decision can then be made on whether or not to invest. All share offers are on the exact same terms as major investors, making it fair for everybody. You can sign up to email alerts on new offers and there is also an app available.
Subscribing To An Offer On PrimaryBid
This is a simple process. Once you have found a placing you would like to subscribe to, click the subscribe to offer button. Just enter the amount of shares you want to purchase and then complete the payment process by debit card.
There will usually be a minimum value you must subscribe for which can be as low as £100. So you don’t need to be wealthy to take part. You will receive an email confirmation of your subscription.
Once the date for subscription is closed you will receive another email detailing your allotment of shares. It will also advise the date your shares will be transferred to your broker and when they will begin trading. Sometimes when there is high demand, offers will become oversubscribed. This means they could be scaled and you will receive less shares than you intended to originally buy. If this occurs you will always be refunded the difference in price. You only ever pay for the shares you receive.
Note: You cannot transfer your shares directly into an ISA or SIPP account. This is due to HMRC restrictions, they can only be transferred into a general investment account. If you don’t have an investment account then you can create one with any online broker such as eToro.
What Types Of Companies Can I Invest In?
A large amount of companies that use PrimaryBid to raise capital are smaller AIM listed companies. AIM is the Alternative Investment Market in the UK. Although increasingly a number of larger FTSE 100 and FTSE 250 listed companies are using the platform. They include Compass Group, Ocado, Aston Martin and Taylor Wimpey. These are some of the largest listed companies in the UK.
Are There Any Charges?
There are absolutely no commission fees or charges for individuals using PrimaryBid. The company issuing the share placing is charged a fee for the proceeds they raise through the site. This is how PrimaryBid makes money and this fee is not passed on to the subscriber.
As well as not having to pay any commission fee you are also exempt from paying any Stamp Duty Reserve Tax. Usually when you purchase shares listed on the UK premium market such as the FTSE 100, a 0.5% fee called Stamp Duty Reserve Tax is applied (this tax is not applicable to shares traded on AIM markets), you are exempt from this charge when subscribing to new shares through the platform. It is free, simple and fair.
Conclusion – Should I Use PrimaryBid?
I have personally been using PrimaryBid for over a year now, taking place in around a dozen subscriptions. The whole process was found to be seamless and I would thoroughly recommend them to any small investor.
One final point to note. They also have an open letter on their website addressed to the boards and management teams of all the UK’s listed companies. This is to help protect individual shareholder rights. If you are a UK investor I would encourage you to read and sign this. It will help level the playing field with the big institutions and make a fairer environment for smaller investors. You can find it here.
Hopefully you will have found this post useful. If you are new to investing, we would recommend you start with a good investment book. Find our list of some of the best on our page below.
Are you interested in learning about other types of investments? You might like to view some of our blog posts below for alternative investment types.
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