Small shareholders not highly prized

This week we have seen the two extremes of dot.com flotations - one where the average punter didn't even get a look-in and another where so many punters subscribed for shares that they all ended up getting only a derisory allocation.

The flotation where the punters were given the cold shoulder, of course, was Riverdeep's flotation on the Dublin and Nasdaq markets. Institutional subscribers to the Riverdeep IPO have, of course, done very nicely given that Riverdeep priced the share offering at such a ludicrously low level that it was guaranteed the massive first-day premium that has had the institutions purring with delight.

Those with even bigger grins on their faces are the select group of investors who were given the option of taking up Riverdeep shares in the private share placing last year and who are now nursing massive paper profits. Paul and Pauline Punter, however, have no option but to go into the market and pay the prevailing price for Riverdeep shares, if they are stupid enough to do so.

The reality is that for all the talk of wider share ownership, many companies going to the market have no interest in having a large number of small shareholders on their register. The likes of Riverdeep, Iona, Trintech and Baltimore are perfectly happy to raise their money from institutions and can happily do so without the nuisance value of a large group of small shareholders. After all what chairman and chief executive of a dot.com company wants to be bothered by all those silly questions that shareholders inevitably pipe up with at an annual meeting.

It was ironic then that when one company went to the opposite extreme and ended up issuing a paltry number of shares to investors, it incurred the wrath of the punters. Travel website lastminute.com was very democratic this week when it gave the same allocation of 35 shares to every one of its 189,000 subscribers, an allocation that meant that the punters ended up with just £135 sterling worth of lastminute.com shares, instead of the £500 to £3,000 worth of shares they applied for.

In these sort of situations where there is such a huge level of over-subscription, companies and their advisers often conduct a ballot and reduce the number of applicants getting shares. But lastminute.com decided to take democracy to its extremes, give a flat allocation to everybody and ended up satisfying nobody, especially with the super-hyped shares falling back almost all the way to their flotation price after the mandatory first-day surge.