Too little, too late. Why Britain's IPOs are no longer working

So, why else are investors fatigued? At present, there is too little time to read the prospectus fully. It is published late in the IPO process despite being the most important document. Ideally, the prospectus should be used to question management, but it is rarely available in time to do this. The other day, I heard a well-known investor say that he had purchased shares in a new issue without seeing its prospectus. Well, it wasn’t me!

Hard copies of presentations given by management are never left for investors to scrutinise at their leisure – the company’s advisers remove them. The marginal buyer prices IPOs, so there is too little buying interest after the IPO and, not surprisingly, shares find it hard to make healthy gains over their issue prices. Too many advisers are involved and there is too little incentive for independent comment.

The objective appears to be to maximise the IPO price, which sometimes determines the advisers’ fees. The question, therefore, is whose benefit the price is being maximised for: the advisers and the sellers? IPO price ranges are too wide – whatever happened to the successful “Tell Sid” strategy of setting a single price? Advisers are paid fees to get this right – anyone can set a range.

In some IPOs, companies have been dressed up to be something they are not. In recent issues there has been confusion as to whether a company’s main business is in leisure, retail or insurance. How can this be?

Also, as much as I think hedge funds provide a valuable function in providing uncorrelated returns to investors, a look of horror will quickly manifest itself on the face of the long-only fund manager who finds himself alone on a shareholder list otherwise full of hedgies.

Like them, he will run for the exit as soon as the price falls below the issue price, resulting in another IPO disaster.

And finally what is the purpose of the “green shoe” (over-allotment provision)? Is this really an IPO stabilising system or an opportunity for advisers to increase their fees?

Among the many companies to go public in 1720 at the height of the South Sea Bubble, one famously advertised itself as being “a company for carrying out an undertaking of great advantage, but nobody to know what it is”. We have moved on from those times. But have we moved far enough?

• Tim Steer manages the Artemis UK Growth Fund

more