19th July 2016
Hargreaves Lansdown says the government should honour its promise to offer Lloyds shares to retail investors rather than simply allowing City institutions to snap them up.
The firm says that no doubt the City is very keen on the idea of bumping retail shareholders from the sale of the remaining government stake in Lloyds, as it means they will get to pick up even more shares.
However it points to the huge amount of interest from the public in the sale of Lloyds shares. Indeed 350,000 private investors have already registered an interest in the share sale via the Hargreaves Lansdown website.
Hargreaves argues that public offerings encourage people to save for their future, and also serve to diversify the shareholder base of the company issuing shares.
The government has repeatedly promised investors a public sale of Lloyd’s shares. Given the wholesale changes in the cabinet, we urge the new Chancellor to confirm he still intends to make good on the government’s promise to hundreds of thousands of private investors.
So far the government has made £16.6 billion from the sale of Lloyds shares, plus a further £3.2 billion from dividends and fees. The initial bail out was for £20.3 billion.
HL says that to break even on the project, the government now actually only needs to raise £544 million from its remaining 6.5 billion shares. So it needs to sell those shares for just 8.4p each.
The Lloyds share price currently sits at around 55p, following a Brexit-induced slump. However, the government would still turn a tidy profit from the Lloyds bailout, even if it launched the sale at today’s prices, and stood by its promise of a 5% discount and a one-for-ten bonus share issue for private investors,
Laith Khalaf, senior analyst, Hargreaves Lansdown says: “We would urge the new Chancellor to confirm the government still intends to press ahead with the public sale of Lloyds, and isn’t going to bend to the will of the City by dishing the shares out only to big institutions. Hundreds of thousands of private investors have been patiently waiting for this sale, and would be glad to hear the government intends to keep its promise.
“The Exchequer is already within a whisker of breaking even on the Lloyds bail out, and would still make a very tidy profit if it sold its remaining stake at today’s share price. So far the City has gobbled up three quarters of the government’s stake in Lloyds, it’s only fair to share the remaining stock with private investors.”