That big players have information, connections and access that ordinary investors simply can't match, and that stock markets aren't the efficient, level playing fields they are supposed to be…they have reinforced cynical old stereotypes about small investors as prey for the big sharks.
The Globe and Mail
March 25, 2006
Hortons hears a Hey!
Editorial
It's not often ordinary Canadians get excited about a new share offering, and it's rarer still they clamour for a piece of the action. But this week, financial advisers across the country were flooded with requests from people wanting a piece of the new Tim Hortons share offering.
The overwhelming demand for Tims shares was predicted months ago when owner Wendy's International first announced a plan to sell a piece of its stake in the coffee chain to the public. Tim Hortons is a beloved institution in Canada, where citizens from Victoria to St. John's can define the terms "double double" and "roll up the rim."
But despite expecting huge interest from ordinary retail investors, Wendy's bankers allocated just 16 per cent of the shares for retail buyers; another 10 per cent were set aside for employees, and the bulk went to large institutional investors. It may make business sense to offer a rare commodity to your best customers, the big institutions that account for the vast majority of normal daily trading activity. But it was still a shame the brokerage community didn't seize the moment to promote investing to a slice of the general public that doesn't often pay attention.
And the Tim Hortons story is more than just a missed marketing opportunity. Yesterday morning when the shares began trading, there was a stampede of buying that drove the price from $27 a share to a peak of almost $38 before it slipped back to close at $33.10. Who was doing the buying? According to trading data, mostly individuals buying the small blocks they couldn't get from the underwriters. Who was selling at a big profit? Mostly the institutions that cashed out after only a few hours — or minutes — of ownership.
And what is the message this sends? That big players have information, connections and access that ordinary investors simply can't match, and that stock markets aren't the efficient, level playing fields they are supposed to be. All of Tim's new shareholders may ultimately do well if the share price climbs over time, but the quick windfall profits went primarily to a lucky group of big institutions. Think how different it could have been if a significant proportion of those profits had gone to the ordinary retail investors who have been the company's most devoted customers.
Tim Hortons has lost the chance to tell another iconic "small-town Canada" story about itself. More important, the big brokerage firms that organized the share offering have lost an ideal moment to make investing exciting to the general public. Instead, they have reinforced cynical old stereotypes about small investors as prey for the big sharks.
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Risks: Initial public offering, IPO, The game is rigged, Canada, United States, 20060325 Hortons hears
