Peel Hunt is in talks with rivals about setting up a standalone company that would offer retail investors access to public offerings and other listed fundraisings.
The UK broker has sounded out interest from potential partners including Numis, Hargreaves Lansdown and Investec about a deal that could include taking stakes in the new independent business, according to people familiar with the matter.
AJ Bell and Interactive Investor have held discussions but are no longer involved.
The move comes as UK ministers and regulators work on plans to encourage more retail investors to participate in the British stock market, with involvement lagging behind countries such as the US.
Peel Hunt’s Rex retail share offer service allows retail customers to participate in IPOs and share placings that are traditionally monopolised by large institutional funds.
Rivals such as PrimaryBid, which is backed by the London Stock Exchange and SoftBank, also allow retail investors to buy shares in listed company fund raisings alongside institutional investors when they are first offered to the stock market. PrimaryBid was valued at about $700mn after its last fundraising in February.
Peel Hunt is expected to file an application with the Financial Conduct Authority in the next few weeks to get regulatory approval for a new financial services firm. The business would operate with a new chief executive and team.
Peel Hunt will remain a significant shareholder in the new company under the plans, which is expected to be renamed Retail Book.
AJ Bell, Interactive Investor and Hargreaves Lansdown already use the Rex platform to let retail customers participate in IPOs and secondary placings. But other banks have been loath to use it on their deals given it directly benefits a rival.
Rex has been used on five non-Peel Hunt shareholder-only fund raisings in recent months where companies have been able to ask existing retail investors if they wanted to participate.
Steven Fine, chief executive of Peel Hunt, declined to comment on the talks but added: “This only works if it becomes completely independent of Peel Hunt.”
Another person involved in the talks said that the business would benefit from cross-industry ownership, and would help boost retail shareholdings in companies in the London Stock Exchange.
The breakout of Peel Hunt’s retail shareholder operation could also bring greater focus on the valuation of the wider business, according to people close to the talks.
The company has a market capitalisation of just over £100mn after shares in the company dropped by close to two-thirds since it listed in 2021, despite having £76mn of cash on its balance sheet at the end of June.
Peel Hunt, like its peers, has been hit by the slump in IPOs this year, although work advising on other sorts of share placings and mergers and acquisitions has been more active.
Hargreaves Lansdown, AJ Bell, Investec and Numis declined to comment.