Octopus Group is facing investor concerns after suspending withdrawals from its Fern Trading investment vehicle, which plays a central role in the Octopus Inheritance Tax (IHT) Service. The company initially announced a suspension of withdrawals for approximately one week in late August 2026, citing a potential merger and acquisition (M&A) transaction. However, the suspension was subsequently extended to six to eight weeks as talks regarding the deal continued.

Fern Trading, valued by Octopus at around £3.17 billion, has been loss-making in recent years and remains a key component for thousands of investors—roughly 18,000—who use its business relief structure to shelter up to 40 percent of inheritance tax liabilities. The proposed transaction reportedly involves Fern’s broadband fibre division acquiring TalkTalk’s PXC wholesale network, a move that has raised questions due to the fibre business’s history of multiyear losses totaling £277 million and a £125 million write-down last year.

The withdrawal freeze has unsettled investors, especially after reports showed that several major wealth management firms had already ceased recommending Octopus’s IHT service prior to the suspension. Notable firms to have dropped the service include St James’s Place, Fairstone Group, and more recently, Openwork Partnership.

Octopus executives maintain the suspension relates solely to the imminent transaction, suggesting it will have a material impact on Fern’s valuation. Kristy Barr, Octopus’s head of retail investments, rejected comparisons to liquidity crises like the Woodford Fund collapse, emphasizing the company’s confidence in managing redemption requests. Nonetheless, some industry analysts highlight the unusual nature of suspending trading to pursue an M&A deal, noting the risk that such measures might prompt further investor withdrawals.

Financial data raises concerns about Fern’s underlying stability. The company, which encompasses over 300 subsidiaries spanning broadband fibre (38 percent), renewable energy assets like biomass, solar and wind (35 percent), and property lending and housebuilding (26 percent), has reported significant pre-tax losses in recent years: £420 million in the latest fiscal year following losses of £18 million and £149 million in the two prior years. Operating cash flow has been negative consistently, with deficits over three consecutive years. At the same time, net debt has increased by 23 percent to £1.04 billion, while net assets declined 12 percent to £2.16 billion.

Certain operating subsidiaries are also facing challenges. Elivia, a housebuilding firm within Fern’s portfolio, needed a covenant waiver in the last fiscal year, while both Elivia and Rangeford, a retirement homes business, report substantial levels of unsold inventory, valued at £226 million and £154 million respectively. These financial pressures contrast with Octopus’s stated valuation, which holds a “market cap” premium of around £1 billion over net asset value, despite prevailing market trends where renewable energy and property companies generally trade below net asset value.

Industry observers warn that if a large number of investors sought to redeem their shares simultaneously, Fern’s assets might be difficult to liquidate quickly without significant value erosion. The utility-scale nature of its renewable energy holdings, including wind and solar farms, and the fact that many subsidiaries serve as collateral against over a billion pounds in loans, complicate rapid sales.

Octopus’s co-founder Simon Rogerson remains committed to finalizing the transaction, which the company hopes will bolster Fern’s prospects. However, investor apprehension persists as withdrawal suspensions continue and doubts linger over Fern’s valuation and financial health.