It certainly feels like a marker in the sand that growth capital is returning to the public markets.
We were delighted to advise management consultancy firm Elixirr on its IPO and admission to AIM this week. With this being the first IPO out of the lockdown period, we spoke with Christopher Raggett, Co-Head of Corporate Finance at finnCap Group, about what this listing means for Elixirr, whether this could be the first of a spate of interesting IPOs, and why public markets like AIM have been so valuable to listed firms during the COVID-19 crisis.
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A few years in recent times have seen events that impact the global markets in a major way; 2020 has certainly not bucked that trend. However, despite the cacophony of business challenges the COVID-19 crisis and lockdown period presented, PLC companies have overall fared better than their counterparts in the private world. This is broadly down to the way that capital markets are structured.
Quick to react
Primarily, having a public listing means access to a broad investor base and a deep pool of capital. Companies are neither beholden to any one single investor, nor beholden to investors that might want to assert a level of control on the company. As such, in times of crisis, publicly listed companies have more freedom and options for funding and growth.
That wealth of choice stems partly from the fact that the public markets are by their very nature volatile – in other words investors are used to crisis situations. Granted the COVID-19 pandemic was practically impossible to predict, nevertheless this is not the first time the public markets investor base have had to stare at those numbers on their screens and been forced to react to a very big problem.
When the pandemic struck, we saw investors move extremely quickly to either save companies or indeed help them grow. This ability to move fast, pivot and adapt to a crisis is catalysed by the regulatory structure of the public markets, meaning few regulatory obstacles stand in the way of investors executing on plans.
Necessity to opportunity
AIM has been particularly plucky during the pandemic. In spite of the crisis, in the first five months of this year it raised £2.2 billion, compared with £1.9 billion in the same period in 2019. AIM has shown itself to be a desirable place to be for ambitious growth companies in uncertain times.
What has been especially interesting is how that support through AIM has trended and evolved over the course of the lockdown to meet the rapidly changing needs of listed companies. Where firstly fundraises were based on necessity, in order to survive, bolster the balance sheet and weather the storm, as time continued investors started getting used to the new normal. Necessity turned to opportunity and those fundraisings quickly became predominantly about growth. Certainly for finnCap, the rapid emergence of COVID-19-based opportunities in Life Sciences has meant we have been very active in this sector of late.
Elixirr admits to AIM
Elixirr’s IPO is notable given that it’s the first IPO out of lockdown and has very little to do with COVID. Rather it’s testament to the company’s resolve and tenacity that it has reached this point despite facing the uncertainties of Brexit, a General Election and a pandemic.
Elixirr is simply a very ambitious growth company listing for the right reason – to grow. Indeed, for that reason it certainly feels like a marker in the sand that growth capital is returning to the public markets.
Elixirr’s IPO is also an excellent demonstration in the incentivisation of a people business through shared ownership. The public markets allow this to be done in ways that cannot easily be replicated privately. Not only can businesses be creative in how they drive growth through their own employees, shared ownership structures on a more holistic level create a sense of common purpose.
Joining AIM also represents a raised profile for Elixirr. A listing on the London Stock Exchange, a highly respected institution globally, is very much a badge of trust with your suppliers and customers.
It is Elixirr’s focus on its people that has made it an attractive company to all manner of private investment pre-IPO. But it is that sense of common purpose through shared ownership and the access to growth capital which underpins listing on AIM that makes this admission the right way forward for Elixirr’s management team.