Could the upcoming AJ Bell IPO launch the next Hargreaves Lansdown?

Low-cost investment and wealth management platform AJ Bell has been steadily building its profile in recent years, and now we know where it’s heading. The group is planning to float on the London Stock Exchange around the end of the year and, if you’re tempted, time’s short.  You only have until 15 October to register an interest.

Ring a Bell?

The AJ Bell float has inevitably raised comparisons with the UK’s most popular investment platform Hargreaves Lansdown (LSE: HL), which has been on a tear since floating in June 2007, one year before the financial crisis struck. If AJ Bell can achieve a fraction of its success, it could pay to get in early.

AJ Bell may struggle to make the same kind of progress because it’s tilting at a more mature and competitive market, one that Hargreaves Lansdown helped to create. Off the top of my head, I can list a string of fund supermarkets and investment platforms, including Alliance Trust, Bestinvest, Cavendish Online, Chelsea Financial Services, Fidelity FundsNetwork, Interactive Investor, The Share Centre and, well, you get the point.

Float on

Hargreaves Lansdown floated with a market-cap of around £700m, but is now a FTSE 100 stalwart worth £10.7bn. Investors who have held the stock since its debut at £1.62 have reaped massive rewards, as it trades at £22.24 today, an increase 1274%. It’s also one of the most profitable companies on the London market

Incredibly, its stock continues to rise, up 53% in the past 12 months alone. The result is that it now trades at a massively pricey 45 times earnings. But with earnings per share forecast to grow 16% in the year to 30 June 2019, it could justify its valuation once again. Especially with revenues forecast to leap another 14%, from £447m to £511m. 

Andy man

AJ Bell founder Andy Bell is a less flamboyant public figure than Peter Hargreaves, who is said to have donated £3.2m to the pro-Brexit Leave campaign, more than any other individual. But he also has a clear idea of where he’s heading.

Bell says that IPOs are traditionally done behind closed doors with retail investors rarely getting access to the flotation price of the shares. “As a company that aims to make investing easy for people, this didn’t feel like the right approach for us and so UK customers that have an account with us by 15 October will be eligible to apply for shares.”

Tempting offering

If the IPO goes ahead in December, the application period for eligible customers may start at the end of November, or early December, and be open for a minimum of seven days. You can invest via a self-invested personal pension (Sipp), Isa, Lifetime Isa, or standard dealing account with a minimum value of £1,000 and the maximum depending on demand.

Investing in IPOs is always risky. Especially in a wealth manager at the end of a 10-year bull market run. So read the prospectus carefully when it’s published, probably in November. Alternatively, you may want to drive away a piece of Aston Martin, this autumn’s other IPO.