By Jon Roast, Senior Manager, Capital Markets
The quietness of the IPO scene in the UK has been recognised globally, and it’s even deterred certain companies from choosing to list on UK stock markets all together. However, the changes to the London Stock Exchange listing rules in the coming months could potentially make the UK a more attractive listing venue. As discussed in our recent free to attend Lunch and Learn webinar, being prepared is essential for a business to ensure long-term success in any market. This expert insight within our inaugural session was provided by our very own Jon Roast and Steve Playford both of whom specialise in helping to prepare businesses for becoming publicly listed companies.
So, what do you need before listing?
A compelling company story
Establishing a great company story will highlight to investors how far your business has come since its inception. The better your story is, the more likely brokers will agree that you are ready to list publicly.
Hiring the right legal team will ensure your IPO process is fully compliant with the UK law and, if needed local law. Their role is to handle the ins and outs (and the heaps of paperwork) of the process in relation to the law while protecting your best interests. They have the knowledge and experience to compile all the information relevant to your IPO into a Prospectus or Admission document for potential investors to read.
A corporate broker or nominated advisor (NOMAD)
Brokers and NOMADs do much more than assessing your company story to determine if you have an investible business. They will play a significant role in your listing and holding your hand through the journey. The key difference between these parties is that Brokers specialise in bringing buyers and sellers together and are not involved with some of the extensive advisory responsibilities of a NOMAD
Appointing the right organisation to manage your share register early, before going public, is crucial to ensuring the process runs smoothly. Among other share registry management duties, they will also be responsible for distributing relevant documents to your investors.
An appointed company secretary
Company secretaries act as the corporate glue of publicly traded companies and is not a role you should wait too late to fill. Their responsibilities typically include establishing robust corporate governance procedures, proactively supporting the board and chairperson of the business, establishing dealing codes and collating relevant documents. Bringing a company secretary on board early, who has listed company experience can be invaluable in the lead up to an IPO.
What are the consequences of poor pre-IPO preparation and corporate Governance?
Being unprepared for your business to begin its public life comes with a lot of risk. There are many mistakes’ companies make that create negative media headlines, including:
Unfair and poor governance framework development puts employees working for your business at risk of being underpaid, which can lead to serious reputational damage and legal sanctions being brought against your company.
Breach of AIM rules and listing regulations, putting your business at risk of being investigated and/or fined. Certain rule breaches, such as insufficient declarations, can lead to serious fraud investigations and could even lead to jail/prison sentences.
Poor accounting and insufficient reporting can also lead to legal consequences and heavy fines while, much like the previously mentioned outcomes, will negatively impact your relationship with your shareholders as you will appear to them as untrustworthy.
Following on from our live Q&A within the IPO: Lunch & Learn webinar, we took the opportunity to answer a few more important questions.
Which market should clients look to list on?
“There are various markets for you to explore as a listing venue, from the Main Market of the LSE to AIM or Aquis, your appointed lawyer, bank, NOMAD or broker are there to give you guidance on the most suitable market for your business and to get you started your journey on as a listed company.”
What is the process if you are a company based overseas and looking at London listing?
“There are a few options available, whether you are already listed and are exploring a dual listing or looking to list solely on the London Stock Exchange. Navigating the complexities of listing in London however, when retaining your incorporation locally can be tricky but rest assured this is a well-trodden path.
In essence to allow overseas companies to gain the full benefits of being a London quoted company without having to compromise the benefits or efficiencies of maintaining their existing domicile, Link pioneered something called Depositary Interests (or DIs) almost 24 years ago. DIs allow the shares of international issuers to be held and transferred within the UK settlement system (CREST) without the need to incorporate a new holding company in one of the ‘home nations’ and by that, I mean the UK, Jersey, Guernsey and Isle of Man.
On the flip side, and interestingly, some issuers incorporate ‘home nation’ TopCos while retaining their identity and operations in their local market.”
When is the best time to list on the exchange?
“If you have a good business, with financials that make sense to and for investors, coupled with a story to tell, then a listing is always worth exploring. There are of course factors to consider when timing your IPO i.e., you may not want to list during periods of certain vulnerabilities however, your appointed advisors are there to help you navigate this and create the right timetable for you.”
What makes a great IPO?
“Great question, I think taking time to think about and appoint the right working group for you and your business is key. You will likely be thinking about advisors, banks, NOMADs, law firms, PR agencies, Registrars, appointing a company secretary and navigating how it all comes together. The main takeaway for any IPO candidate is that having as many of the necessary services engaged early on in the process is incredibly valuable in the lead up to and post listing. The key to most companies’ success is timing, early preparation and bringing the right working group on board who understood their brand, messaging and goals.”
Wish you were better informed about certain industry topics and processes? Link Group’s Lunch and Learn series is just a small part of a collection of thought leadership content that dives deep into complex subject matters, with expert insight from our specialists. Together we achieve, and the better you understand how different parts of our industry operate, the more effectively we can work with you as your partner.
To avoid missing out on our next Lunch and Learn webinar and all of our thought leadership events, click here to sign up the Ahead mailing list where you can receive all business updates and event invites directly via email.
For any further questions or information about IPO readiness, please get in contact with Jon.