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Pelagic Partners What Are Anchor Investors

Pelagic Partners: What Are Anchor Investors? Pelagic Partners is a company founded and built by experienced independent shipowners and managers.…

Pelagic Partners What Are Anchor Investors

29th January 2024

Pelagic Partners: What Are Anchor Investors?

Pelagic Partners is a company founded and built by experienced independent shipowners and managers. The company benefits from access and intimate knowledge of the global shipping markets, acquired and enriched over the course of three decades. Pelagic Partners’s control of the whole chain means it is uniquely placed to close market-level acquisitions and make them competitive. This article will take a look at what anchor investors are and their vital role in initial public offerings (IPOs).

Also known as a “cornerstone investor”, an anchor investor is an institutional investor that participates in IPOs. Anchor investors provide stability in an IPO of a company with regard to share prices. Common types of anchor investors include insurance firms, foreign portfolio investors, and mutual funds subscribing to shares before an IPO is open to the public for subscription.

Essentially, an anchor investor is an institutional investor who purchases a large number of shares in a company for a fixed price prior to the company’s IPO. The presence of an anchor investor provides significant reassurance to other investors, helping to generate interest and attract investment in the IPO. Anchor investors not only commit a considerable amount of money but are also generally subject to a lock-in period of anywhere between 30 and 180 days.

The price at which shares are offered to anchor investors is determined by the company itself, falling within the range of the IPO price band. The allotment of shares to anchor investors is typically completed the day before the opening date of the IPO. Overall, anchor investors play a crucial role in helping companies to launch IPOs. Just as an anchor is used to steady a ship, anchor investors are employed by merchant bankers to bring stability to IPOs. Placing huge bids, anchor investors play an integral role in the process of price discovery, as well as inciting interest from institutional investors in an IPO.

An anchor investor is an institutional investor, for example a pension fund, mutual fund, bank, or other credible financial institution. Anchor investors purchase a significant proportion of a company’s shares at a fixed price within the company’s price band. Anchor investors are critical in increasing a company’s IPO demand and attracting retail investors. The concept of anchor investors was introduced in 2009 by the Securities and Exchange Board of India, which allows companies to allocate anywhere up to 60% of their total IPO offering to anchor investors.

The anchor investor’s role is important in several key aspects of the IPO. First, the anchor investment’s input is crucial to price discovery, providing a gauge of interest of institutional investors in the IPO. In addition, anchor investors help to boost investor confidence, which is vital for successful IPO subscription. When anchor investors allocate capital to an IPO, this sends a clear signal to investors, indicating that that it is credible and stable and highlighting its investment potential.

By investing in a company prior to the opening of its IPO, anchor investors attract and provide credibility to other investors, demonstrating confidence in the company’s growth potential, increasing demand for the IPO, and potentially driving up the IPO price. When an anchor investor buys shares, they agree to hold these shares for a minimum of 30 days, stabilizing the share price and typically attracting retail investors and high-net-worth individuals to the IPO subscription.

Anchor investors play a critical role in both primary and secondary markets. From the retail investor’s perspective, their presence in the share market provides reassurance, as anchor investors help to reduce a great deal of the price volatility associated with freshly listed shares. In addition, anchor investors also provide reassurance to smaller, less experienced investors who are new to the world of stock market trading.

About Pelagic Partners

As a manager of shipowning funds, with its investments spanning a wide range of shipping and offshore sectors, Pelagic Partners is redefining maritime investments, producing a steady stream of cashflows for both institutional and individual investors.

Present across the whole value chain, Pelagic Partners enables its partners to join the company as an active player in the global shipping industry, a sector that accounts for a staggering 90% of international trade. As a pillar of the global economy since the early ages, the global shipping industry is constantly evolving and proving its vitality in sustaining life. With firsthand experience of weathering the waves of change, Pelagic Partners provides the benefit of its expertise to all of its investors and partners. The company emphasizes the value of being aligned with its partners by serving as an anchor investor in the fund itself, enabling it to stay true to its core foundation and build a brand its partners can relate to and trust.

Founded by experienced independent shipowners and managers, Pelagic Partners benefits from a unique understanding of global shipping markets as well as unparalleled access to deal flows and investment opportunities.

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