New Issues Examined by Oliver Haill

With the AIM index having risen by 35 per cent since the start of March, more investors are beginning to cast their gaze over undervalued small-caps once again. Sam Smith, managing director of corporate finance and broking house FinnCap, thinks that ‘investors’ risk appetites have changed. But what this means for IPOs is that they will need to be at a significant discount to what’s already there.’

Mark Percy, a director of corporate finance at Seymour Pierce, thinks the floats that have got away recently represent special cases. ‘The recent IPOs have been new companies, funds with limited trading history and not as much data for due diligence, so it’s been quicker for them to float. The process is a time-consuming one for companies so the enquiries made now will not come until at least September/ October sort of time.’

Although five companies are mooting potential floats, and anecdotal evidence suggests that many more companies have firm plans, the summer will likely see the doldrums return, at least temporarily.

Richly experienced corporate finance head Stephen Roberts of Daniel Stewart adds that no IPO is likely to go ahead without getting all boxes ticked by those who matter most – the money men. ‘Everything we’re doing now will have a pre-marketing element [where] we get the view of institutions first. We have three things we’re looking at seriously but it’s not going to be until Q3. There’s no point in going round the City in the summer – I should be in the Caribbean in the last two weeks of July and in August there are not going to be any institutions around.’

Sectors that count
Smith agrees. ‘It’s too early to say that there’s going to be a flood of IPOs, but it’s starting to get on people’s radar,’ she says. ‘We are seeing more enquiries from companies – and bearing in mind that the lead time is about six months, the majority of people are not going to be looking to come to market until Q1 next year.’

FinnCap has a couple of potential newcomers looking to join in the autumn. ‘One very small one, in property services, has already pretty much got a small fundraising sorted but is doing an IPO for the paper to make acquisitions,’ explains Smith. ‘The other one – a specialist support services company: very, very niche – is looking at October and is a £30 million market cap company, and we’re raising significantly more than that.’

Roberts concurs that ‘it does depend on the sector’, but Daniel Stewart has seen much more interest in recent weeks. ‘Of the three things we are looking at, one is in insolvency services, one in oil services – both sectors that are of great interest to institutions – and one in media. And all are raising money.’

Desperate for a CIG?
June’s single AIM newcomer was media shell company Critical Information Group. Its veteran board – led by executive chairman David Smith, former Taylor & Francis chief before its sale to Informa, and former colleague Tony Foye as operations head – intends to acquire and consolidate in the media sector.

Broker and adviser Singer Capital Markets has drummed up £1.56 million from ‘selected UK institutional investors’ to add to the £1.45 million contributed by the board, taking the total above the £3 million that shell companies need to list on AIM.

Smith, Foye and co reckon the market holds numerous undervalued gems for them to unearth, with their focus being on publishing and events businesses. Rather impressively, they says they has already identified suitable businesses ‘which may have a valuation of up to £1 billion’.

It looks a story worth following – especially, as Smith points out, ‘the media sector is always an exciting place to do business’.