Hargreaves Lansdown shares rose the most since a decade ago on Thursday, after a surprise bid led to speculation about a bidding battle.
The FTSE 250 company’s shares jumped nearly a fifth in one day, marking the largest rise since 2014. This was after the company rejected an initial £4.7bn offer from CVC Capital Abu Dhabi and Nordic Capital.
Hargreaves Lansdown, under the leadership of Alison Platt’s, board rejected the 985p offer per share, claiming it was an undervaluation.
The move, however, prompted the market to hope for a higher offer and increased the possibility of another bidder.
Charles Schwab, a US investment giant, was mentioned as a potential counterbidder. Rival private equity firms and banking institutions were also mentioned as possible bidders.
Hargreaves Lansdown’s shares reached a high of 1,151p on Tuesday, compared to 979p when the stock opened and far above the offer price that was rejected. The stock closed yesterday at 1,120p.
The Abu Dhabi consortium has until the 19th of June to make a firm bid.
Peter Hargreaves would receive a nearly £1bn payout if took over the fund supermarket.
Reuters reported Mr Hargreaves who owns 19,7pc in the company was open to the idea of taking it private and that he had been talking with investors about a deal.
Mr Hargreaves refused to comment on the current situation and said that he would “keep an eye on it”.
Analysts at Investec stated: “We wouldn’t be surprised to see an alternative buyer emerge from this process, and we see a significant strategic rationale for a major UK financial institution or if Investec were to look at Hargreaves Lansdown as compared with Investec.”
They said that a trade buyer with an established customer base would be able to afford to pay a higher price than a private equity bidder because Hargreaves Lansdown’s merger with the company would result in “significant” growth.
Charles Schwab has declined to comment.
Short-sellers were caught off guard by the sharp increase in Hargreaves’ share price.
Before the bid was announced, hedge funds had sold around 5.1pc, or £235m worth of Hargreaves shares, short.
Short-sellers are those who sell shares with the expectation that the price will fall and then buy them at a cheaper price in order to pocket the difference. Hedge funds have to buy back shares at higher prices when they increase.
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