There was something, like the whiff of cordite from a distant battle, about Monday’s first dealings in Halifax shares that was familiar of former epoch making events. I suppose it was the reports of millions of new shareholders making instant profits that reminded one of those salad days a decade ago, when people sat in judgment of the great privatisation share issues.
It is at once nostalgic and wearisome that such mass stock market times should recur in the mid-Nineties, with Alliance & Leicester and Halifax both happily away and the prospect of further joy for the sons and daughters of Sid from the likes of Norwich Union and the Woolwich.
Nostalgic because we see that the market – at both supply and demand ends – has learned little from the Eighties about share marketing. Wearisome because there is a feeling that flotation may be deemed to be an end in itself, rather than as a means to many ends.
The market at the supply end clearly valued Halifax too cheaply. Initially priced at about 12bn, the Halifax has turned out to be worth close on 20bn at flotation. This is, since the scene setting days of the Eighties, invariably meant to be a triumph for small investors, who saw the value of their shares rocket in early dealings. The point so often missed is that this is the margin of temptation – this is the City’s institutional means of getting retail investors out of the stock early, so that the City itself enjoys the long-term value of ownership.
Last Friday, just ahead of first dealings, the market was talked down and there was much speculation of bearishness in the banking sector (there was even talk of the imminent resignation of the chief executive of Barclays, Martin Taylor). Who was doing this talking? Why, the very institutions which were bidding relatively low at auction on Friday, indicating an opening price for Halifax in the order of 720p, but which were buying on Monday at 775p.
And retail investors are as willing dupes as ever they were. How else can their piling to the exit just as soon as a fistful of oncers was wafted in front of their current accounts be explained?
I mustn’t be too pious. One man’s bribe is another man’s holiday in the sun – or second-hand Sierra, now an icon of the aspiring classes since Tony Blair embarked on his road to Downing Street via Damascus. I would only say that a bribe to part with ownership of something ought to be measured against a valuation that transcends Tenerife or an N-reg Ford.
At its nadir – and I use the word advisedly – is the kind of bribe that the wretched Andrew Regan intended to offer members of the Co-operative Wholesale Society. Never would 1,000 have looked more like 30 pieces of silver. Certainly, there are grounds for claiming that venerable, mutually-owned organisations could be better run. But it doesn’t follow that the current owners should be offered a few quid to part with something that has offered an alternative to the stock market’s short-termist ways for more than a century, so that some smoothies behind brass plates in Monaco can clean up.
I don’t put the flotations of the Halifax, Norwich Union, Woolwich et al in the same category. Nonetheless, there are well-established City methodologies underway here that should be inspected. We all have an interest in making a few quid in the stock market, especially if we find ourselves lucky enough to be on the receiving end of a windfall from a building society or insurer of which we happen to be a member (why, incidentally, is “windfall” a matter of celebration for shareholders in this context, while it is a cause of punishment of shareholders in privatised utilities?).
The question is surely one of what happens next to these newly-floated companies – will they be better organisations as public companies than they were as mutuals? The record of the listed high street banks does not bode well. But let’s be as bright as we can – perhaps what is happening now will shake up the retail financial services sector.
Abbey National, the first of the major mutuals to float, hotly denies that it has held merger talks with NatWest. Whatever its circumstances, the rumour is symptomatic of the kind of rationalisation we can expect in the sector. Change hangs in the air like cordite. And progress is long overdue in retail financial services.
It also has an impact on the stock market itself. This year’s flotations of the mutuals brings a tidal wave of trading volumes to the market – the Halifax alone is expected to almost triple daily trading volumes.
The market should adapt to cope. Ironically enough, it will be some of the very institutions that are floating, or rationalising as the result of such flotations, that will have to do the adapting to cope with new trading volumes.
I’m not saying that all this won’t have beneficial effects for the City and investors alike. All I am saying is that a process of profound change is underway and, if we can raise our eyes for a moment from the scrabble for profits, we might notice whether it is a change for the better or not.