An American private equity firm is targeting UK investors with discounted share purchase offers, raising concerns among experts about potential risks to retail shareholders. This development followed Litani’s recent letters to up to 180,000 shareholders of the financial services company Aviva, offering to buy their stock at a 17.5 percent discount to the prevailing market price in what the firm described as a “mini-tender” deal.

The offer is directed primarily at Aviva shareholders who hold their shares directly, often in the form of paper certificates, a practice more common among older investors. Litani’s approach leverages a High Court ruling from last year that granted the firm access to shareholder contact details, a decision that has drawn criticism from investor advocates. Mark Northway, from ShareSoc, a support group for individual investors, called the ruling “mind-blowing” and warned it could set a precedent enabling similar firms to approach shareholders of other large companies.

Litani’s business model appears to be based on arbitrage—purchasing shares below market value from one group of owners and reselling them at full price elsewhere. The company previously made a comparable offer to shareholders of Sun Life Financial, a Canadian insurer, in July 2024, with more than 580 investors accepting the discounted purchase.

Aviva, which sought to block Litani's actions through the courts, currently has one of the largest retail shareholder bases in the UK. A significant portion of these shareholders retains their shares directly due to the company’s historical structure, which includes legacy entities such as Norwich Union, originally established as a mutual society. Aviva has also sent letters cautioning shareholders against accepting Litani’s offer and highlighting alternative methods to sell shares, including through brokers or its own share-dealing service.

Litani’s correspondence informs recipients about the discount and encourages them to weigh the risks, emphasizing that shareholders will have a 14-day cooling-off period after acceptance during which they can reconsider. However, critics argue that the offer disproportionately targets more vulnerable, often long-standing shareholders. Amit Vedhara from ShareSoc described the approach as “despicable,” cautioning that although the offer is technically legitimate, it is financially disadvantageous to shareholders.

Financial authorities have taken note of the issue amid ongoing changes to shareholding structures in the UK. The government plans to phase out paper share certificates by the end of 2027 and eliminate the possibility of holding shares directly by 2029, a process known as dematerialisation. Northway suggested this transition could increase the exposure of shareholders to firms like Litani, as direct shareholders will be required to transfer their holdings to brokers or platforms.

Regulators have so far refrained from intervening directly. Last week, Nikhil Rathi, chief executive of the Financial Conduct Authority (FCA), informed the Treasury select committee that the agency is monitoring Litani’s communications but has yet to take enforcement action. An FCA spokesperson advised shareholders to carefully review any offers and ensure they understand all relevant information before making decisions, underscoring that firms must present offers clearly and fairly.

Litani declined to comment on the matter.