July 16, 2018
Why do businesses choose to offer their shares on the open market in an IPO (initial public offering)?
Raising capital, creating and crystallising value and securing the long-term future of a business are critical decisions for owner-managers and there are a number of options available to achieve this. At N+1 Singer, we are passionate advocates of the power of the public markets to create wealth and deliver sustainable value.
What are the advantages of listing on the stock exchange?
One of the key advantages is management control and freedom to execute on a strategy. While investors always have the option of voting with their feet, the public markets are largely comprised of a passive investor base. Raising growth capital should be the primary motivation for an IPO, but it can also provide an opportunity for at least a partial selldown by founders/early stage investors. A stock market listing also provides a currency for acquisitions and a means for attracting and incentivising management and employees. Finally, an IPO often raises a company’s profile and enhances its credibility with suppliers, creditors and customers.
What do investors look for in an IPO?
There is no single answer to this but a differentiated offering will help companies stand out from the crowd. For small and mid-sized companies, growth potential will likely be the primary consideration, but other characteristics such as disruptive technologies, market positioning, high and defensible profit margins and predictable, recurring revenues are all highly prized, with the ability to pay dividends an added bonus. Above all, public market investors look for strong management teams with a clearly defined strategy and (ideally) skin in the game, ensuring the interests of investors and management are aligned.
What to expect as a listed company
Of course, an IPO should not be viewed as an end in itself, particularly for management and ongoing shareholders. Being a publicly listed company means exactly that – public! Interim and annual reports need to be published and investors kept regularly updated. This brings a level of scrutiny, but also provides the means for management teams to communicate with all stakeholders, including employees and customers in an open and transparent manner. Ultimately, successful delivery should create value for all shareholders.
Why choose N+1 Singer
N+1 Singer is one of the top three brokers in the UK (by number of clients) and has a strong track record of deal execution, with unrivalled placing power and deep relationships with leading institutional investors in the UK. Uniquely, it has a permanent presence in the North East region, with a team of 12 comprising experienced corporate financiers, brokers, equity research analysts and sales traders. We have raised £3.1bn for our clients in over 130 capital markets transactions since January 2013, including most recently raising £10m for software business i-nexus in its IPO on AIM in June 2018. The market remains very much open for business. We are currently working on one IPO from the region, expected to complete in H2, and we are always keen to meet ambitious North East companies to discuss strategic options.