With an indicative range of 140p to 160p a share, the pricing of the Hargreaves Lansdown float will give the financial adviser a market value of up to £759m, or £711m at the midpoint.
Back in January, when the group appointed Lexicon Partners to explore its options, the reported value being placed on the of Sipps, Isas and wraps group was £600m. Last month, when Hargreaves Lansdown confirmed it was heading for the public market, that guidance had increased to £650 to £700m.
Now the business seems to be looking for a price tag north of the £700m mark. Good news of course for founders, chief executive Peter Hargreaves and chairman Stephen Lansdown, who each control about 40 per cent of the business – at the top end of the range the value of their stakes now exceed £300m.
Others are slightly less gung-ho. Clear Capital, an independent research group that has been studying the Hargreaves Lansdown offering, thinks that while at a £600m the valuation looked “very reasonable” at around 17 times forward earnings – a £750m price tag, at about 21 times, looks rather less so.
Part of the undoubted appeal of the Hargreaves story, they say, is the company’s wrap platform. Wraps, which have proved hugely popular in other markets such as Australia, allow IFAs to bring together an individuals various assets in one web-based platform. But despite predictions of an imminent lift-off in the UK, helped by the arrival of Sipps, they remain in their infancy.
Saurabh Mukherjea, an analyst at Clear Capital, thinks that the offering will go well. “It hits a lot of topical buttons,” he says, pointing to demographic changes, Sipps and the long-term savings market.
One risk he flags though is the outlook for wraps. The Hargreaves plan sees growth in revenues from the company’s wrap platform of 60 to 65 per cent over the next two years. Underlying volume growth of that magnitude is perfectly possible, say Clear Capital. “If it does take off like that, everyone else will jump in,” says Mukherjea. “Prices will get squeezed over time.”
The Hargreaves offer will see the sale of 25 per cent of the business by its existing shareholders – the founders, as well as certain current and former employees and “connected persons.” The directors and senior management have agreed to hold onto their shares for up to four years after the float, with each allowed to cash in a quarter of their post-IPO holding at the company’s annual results from 2008 to 2011.
Citi is sole global co-ordinator and bookrunner on the IPO. Numis is acting as co-lead manager.