Hill+Knowlton Strategies

Ocado; ‘Upmarket groceries that won’t cost the earth’ according to its website, which has likely been getting some extra traffic recently as the firm has dominated the business media over the past 10 days ahead of its flotation on London’s stock market.

Not all of that media has been overly positive on the float however, and indeed neither have many institutional investors – the result of which was the announcement yesterday that the price offered to investors to buy shares has had to be lowered by Ocado’s bankers to perhaps something more realistic for a company that is yet to turn a profit.

Over-egged or premature floats are nothing new but institutional investors’ appetite for them is clearly on the wane and they are increasingly proving to be a tougher crowd to please. The fall in the company’s share price in early trading today is another sign of this.

Ocado however, raised the ante and PR potential on this particular offering by giving its customers the chance to buy shares as well. Again though, there seems to have been little appetite amongst individuals to take up their offer, and this is what really interests me at the moment – what are the key reasons why many of Ocado’s customers (my flatmate among them) haven’t bought into the share offering?

Media coverage and the wariness of institutional investors will certainly have been a factor, but is there something else at play here? Is the average household still interested in buying shares or has the recession, the severe decline in markets and the blow that many would have taken to their personal pension pots during it, scared them off? Equally, are the majority of younger adults interested and engaged enough in the issue of personal finance to act on such an offer?

Maybe, but then again maybe not – as noted above, Ocado’s customers only represent a certain part of the nation’s demographic so it’s hard to draw any firm conclusions on these theories.

Nevertheless, the lack of customer take-up is potentially important for another reason. On Tuesday, UKFI, the body that oversees the government’s stakes in RBS and Lloyds TSB, announced the appointment of Jim O’Neil from Bank of America-Merrill Lynch. Amongst other things, Mr O’Neil has been hired to “develop and execute the strategy for divesting the stakes” in RBS and Lloyds TSB – in other words, to prime both companies for a return to non-government ownership in one of the biggest share sell-offs in British history.

Whatever Mr O’Neil’s strategy eventually is, it’s going to have to appeal to the public at large. In February George Osborne claimed that the sell-off would include a large proportion being offered to the general public, and in particular that the sale would target the young and the less well-off – not exactly the easiest demographic to target when it comes to such things.

Plenty then, for Mr O’Neil to think about as he sinks into his new chair and perhaps time to bring back Sid?