Hargreaves Lansdown shares have rallied on the back of a trading update covering the coronavirus lockdown despite the “unmentioned elephant” of a potential class action lawsuit over its marketing of the Woodford Equity Income fund.
The D2C platform group revealed that assets under administration had shrunk by 8% from £105.2bn to £96.7bn in the four months to 30 April as markets seized up amid the coronavirus outbreak.
Despite this it took in £4.0bn of net new business over the period, up from the £2.9bn it attracted in the same period last year. Year-to-date it has seen net inflows of £6.3bn.
Its shares initially rallied more than 8% on the update.
Around 94,000 clients signed up to the D2C platform, taking total active client numbers to 1,368,000.
Revenues were also higher at £190.2m compared with £159.5m from the year before as the firm saw record dealing activity in March and April as clients made use of their tax allowances during the traditionally busy ISA season.
“During this exceptionally volatile and challenging period, Hargreaves Lansdown has performed strongly,” CEO Chris Hill said.
“There remains much uncertainty in the coming months and hence, like many businesses, we cannot predict levels of new business or client activity,” Hill continued. “However, we are confident that the strategy we have invested in, with our focus on the needs of UK investors and savers and delivering the highest level of client service, means that we are well positioned to deliver continued attractive long-term growth.”
Elephant in the room
Charlton Illingworth director Jeremy Grime noted the update contained no mention of the potential class action being launched by RGL Management with the help of commercial litigation solicitors Wallace LLP that continues to hang over the platform group.
The pair of firms have claimed Hargreaves continued to promote the Woodford Equity Income fund via its Wealth 50 buy list, while management was aware of the fund’s liquidity issues that would ultimately lead to its suspension, in June 2019, followed by it moving into wind down mode four months later.
“With the recent news that RGL Management says it is now close to launching a class action for HL’s marketing of Woodford the unmentioned elephant sauntering past the boardroom door is the potential Woodford claims,” Grime said in his recap of the results.
He questioned whether the risk/reward was properly reflected in the stock.
RGL is the latest firm to launch a legal challenge against Hargreaves over the Woodford fiasco. Separately, three other legal firms, Leigh Day, Slater and Gordon, and Nelsons, are also investigating whether there is a legal case to be made against Hargreaves over its cheerleading of Neil Woodford.
This month it was revealed Hargreaves plans to scrap its Wealth 50 list, replacing it with an independently governed list of funds.
Hargreaves shares opened 8.5% higher on Thursday morning at £17.27 per share though by midday had fallen back down to £16.27.
