As the City’s leading Financial PR advisor on IPOs, Abchurch keeps a close eye on trends

With the current IPO market somewhat uncertain as a result of Brexit, investor confidence in companies looking to list on the London Stock Exchange is difficult to gauge.  Despite the total number of listings being approximately 50% down on this time last year, the environment within which the successful floats have occurred is important to note.  Whilst high profile floats such as Misys have hit turbulent headwinds and been forced to shelve their IPO plans in recent times, others have flourished in demanding circumstances.  Hollywood Bowl Group, the operator of bowling centres, completed their IPO with a market capitalisation of £240m; Autins Group, the insulation company, floated on AIM raising £26m; and Luceco plc, the British electronics company, listed at a market capitalisation of £209m earlier this month.
 

London’s Q4 IPO landscape continues to look resilient with three noteworthy floats: ConvaTec Group Plc, the medical products company achieved the largest float of the year with a market cap of £4.39bn; FreeAgent Holdings plc, provider of cloud based SaaS accounting software solutions for small UK businesses raised £10.7m with a market cap of £34.1m; and Filta Group, the kitchen specialist raised £6.2m on AIM with a market cap of £22.4m.  GoCompare.com, the price comparison website also intends to float on the LSE for around £400m following its successful demerger from Esure. In fact, over 27 companies, including TimeOut and Hotel Chocolat, had floated on AIM by H1 2016 for a combined value of $1.2bn – a 72% increase on the same half the previous year.  Moreover, the average market cap of AIM companies has been growing steadily and is now at an all-time high of £83.0m in 2016.  These trends empirically validate the position that, whilst Brexit may have temporarily affected IPO confidence, there is still a healthy appetite for companies going public on the London markets at a realistic price.

This notion of market resilience is endorsed by the head of Ernst and Young’s IPO leader for UK and Ireland, Scott McCubbin, who predicted earlier this month that there will be a resurgence in UK IPOs in 2017 as companies and investors acclimatise to post-Brexit market conditions.

With interest rates remaining in the doldrums, Abchurch believes that the London Stock Exchange will remain a highly competitive exchange for future IPOs in the final quarter of 2016 and looks forward to more IPO activity in 2017. 

Asian Companies Listing on AIM

In the past few decades, the Chinese economy has experienced phenomenal growth. And while growth had since slowed, it can’t be ignored that in 2014, China became only the second country in history (after America) to achieve economic output in excess of $10 trillion. In fact, even at the current rate of growth, China expected to surpass the US as the world’s largest economy within the next two decades.

It is no wonder then that foreign investors have been looking for ways to benefit from the Chinese success story. And there are plenty of Chinese investment opportunities right here in the UK. SMEs in China have long struggled to secure capital from Chinese banks and that has sent them elsewhere, including London’s AIM market.

But more recently, the reputation of Chinese AIM listed companies has taken a serious hit. It seems that after a few scandals involving Chinese companies, the market has lost faith in all of them. The problem for most Chinese companies therefore seems to be the result of suspicion and rumour. Of course, this is unfair – the Quindell and Tesco scandals have not resulted in investors blacklisting every UK Company.

So the question is, what can Chinese companies do to increase their appeal to UK investors and continue to tap a valuable source of funding through the AIM market? The simple answer: Transparency. After all, the best way to quash suspicions and rumour is by getting the truth out. So for any Chinese companies listing in London, effectively communicating to potential investors from the beginning is critical – and there are plenty of ways to do this.

The suspicions surrounding Chinese companies listing in London are largely fuelled by a literal lack of visibility. So first and foremost, Chinese companies seeking admission to the London Stock Exchange need to bear in mind that potential investors are based abroad and therefore not able to directly observe the day to day operations of the business. Transparency, achieved in part through increased publicity, is therefore key to bolstering investor confidence.

But an effective communications program requires much more than reaching out to the UK national and investor press only briefly ahead of the IPO. Companies need to communicate through wider media outlets and for a longer period of time in the build up to Admission in order to achieve a successful and hopefully oversubscribed fundraising.

One way to do this is by launching Corporate profiling exercises on the home front. Even when targeting a predominantly overseas audience, the relevance of local and trade press coverage should not be underestimated before an IPO.

This is particularly salient for smaller companies. UK journalists are unlikely to have heard of an Asian based SME considering an AIM IPO. If British journalists can discover an existing profile through good trade and local press coverage (and where appropriate a social media profile) as they go online for further information, it will increase the likelihood of positive UK press coverage at IPO.

Local media coverage is also important for investors, as it plays a key role in reassuring their confidence. If a company attempts to promote itself amongst UK investors without an already established press profile, it could make a company’s story, no matter how compelling, harder to believe. And given the current climate of suspicion, that is risk Chinese companies simply can’t take.

Simply put, a proactive communications program is strong evidence of a company’s willingness to honour its commitment to new and existing shareholders. And, perhaps more importantly, increased transparency will help reassure investors and help regain trust of the market. This strategy will not only help Chinese companies: With London seeking to cement its status as the world’s leading financial centre there is simply no way investors here can dismiss companies operating in a country set to become the world’s economic powerhouse.

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Scottish Referendum vs. UK Election: Return of the IPO

In the last 12 months, two political events have succeeded in concerning the CityFirst the September 2014 referendum was called on Scottish independence, and brought with it a wave of populism not seen for generations. With the SNP and the calls for an independent Scottish state, came the first internal threat to the makeup of our country for centuries, and with this threat, came fear. Fear of a devalued currency, fear that the face of commodities in the UK was about to change, and fear that some of the Country’s great companies were going to have to be described as ‘English’ or ‘Scottish’ rather than the ‘British’ in which they had revelled.

Having attempted a feigned indifference for over a year, financial institutions finally scrambled to limit the damage. The first noticeable victim was the value of the Pound. Having stood strong against the Dollar for some time, it saw a sharp decline to a then seven month low. Next, an almost overnight drying up of IPO work. Concerned by uncertainty, the roadshow wheels grounded to a halt, with businesses deciding to take to the water once a yes / no decision had been made.

Following the no vote, an audible sigh went up in EC2. Within a week, £3 billion’s worth of deals were mooted. From Aldermore to Jimmy Choo, there was a spring in the step of the City again. However, with the election this month, the City again came to a juddering halt. Populism had been caught south of the border, and following the SNP into battle was UKIP, another party not ruled by sense, but by ideals. Between them, and their disruptive might, they threatened to turn the 2015 general election into a fight from which it seemed there could be no winners. With a hung parliament seemingly an inevitability, the bids to woo bedfellows became more important than offering the country sensible policies.

For several fear inducing weeks, especially to the world of finance, it seemed that the only realistic solution able to get over the line would be a Labour/SNP coalition. Even the Conservatives, for years the bastion of business, had to make drastic anti finance moves to appease the blue collar workers it has promised to help. The banking levy, recently raised from 0.156% to 0.21% of all debt held in UK banks. Seemingly inconsequential, but has seen HSBC, one of the country’s leading institutions, making unveiled threats to leave the UK, reverting to its original headquarters of Hong Kong. From the thought of insecurity, markets all but closed. For almost a month, the City was devoid of many IPO’s with companies being warned by advisers that their fundraisers would be very difficult. The Stirling plummeted again, with many believing that $1.40 would have been more than possible if ugly scenes and recrimination had followed on 7 May.

However, markets are resilient, and populist parties live and die by the frenzy they create. UKIP, at one point claiming potential victory in 40 seats, came away with only a solitary voice, Carswell in Clacton, with even their leader barred from Westminster by the voters of Thanet South. Even with the SNP’s astonishing numbers north of the border, the unexpected rout of Labour around the country led to a combined total of 288, nowhere near enough to damage the Tories. In achieving 331 seats, David Cameron achieved something that no PM with over 18 months experience has done since 1900, increasing his margin of victory from the start of his incumbency.

From this, the City took heart. Money and goods has been traded within its walls since the Roman’s first came to this country, and the election could never truly stop this. World Wars, disease, and political turmoil far greater than that seen today have not immobilised finance, only pausing it, and therefore, the only likely casualty of this election will be the bankers’ summer holidays. Hindsight of the Scottish referendum shows us just how quickly institutions can dust themselves off. History is a long study of applying hindsight to the future, therefore, come Summer, the wheels will be turning once more. With promises of floats already abounding, the City is already leaving the election behind.

Nevertheless, there is one final caveat. During the last parliament, the Conservatives, in a bid to appease their back benches and the increasing Eurosceptic population, promised an in/out EU referendum by 2017. This leaves the City in quandary. Nearly three quarters of those working within the Square Mile plan to vote in favour of staying within the European Union, and yet, as with the Scottish referendum before it, fear will descend on the City and quite possibly global markets again. With his slim majority, Cameron is acutely aware of his potential ‘bastards’ – Rees Mogg, Bone, Davies – all back bench heavyweights and therefore able to wield power in the future. Mark Reckless, the Eurosceptic and UKIP defector who was recently ousted from his seat in Rochester and Stroud, must be looking at the power his former colleagues now hold longingly. For this entire election, the public were sold a story that it would be the outside powers who would force the issue, the days of majority were over, with small parties for the first time ever holding the keys to Number 10. Ironically, the biggest threat to the City’s interests are now not from a raging bunch of Scottish and anti- EU populists desperate for financial blood, but in fact the very Government that EC2 was so happy to elect.

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Weekly Wrap Up: The Anti-immigrant Immigrant

Bank of England Governor Mark Carney inadvertently put himself in the running to become UKIP’s new leader this week while delivering the quarterly Inflation Report. Never mind that Carney comes from a country built on the backs of immigrants, somehow the Bank’s forecast of economic conditions in the UK was translated into an anti-immigration rant by some newspapers.

The Daily Mail headline that followed Carney’s press conference read, “Foreign workers drag down UK wages, says bank chief: Carney’s explosive intervention as number of EU migrants working here hits 2 million.” The Express ran the following emphatic headline: “Foreign workers ARE dragging down UK wages: Bank of England’s shock warning to Britain.”

But it wasn’t just the predictable Daily Mail and Express that ran the immigrant scare story: The Times headline stated, “Migrants ‘threaten economic recovery’.”

So how did the apolitical Central Bank suddenly make headlines usually attributed to Nigel Farage?

It seems the Canadian banker fell victim to the UK media’s drive for sensational headlines. What he actually said was: “In recent years, labour supply has expanded significantly owing to higher participation rates among older workers, a greater willingness to work longer hours and strong population growth, partly driven by higher net migration. These positive labour supply shocks have contained wage growth in the face of robust employment growth.”

Yes, Carney mentions net migration. But his first two points focus on British workers, which the Daily Mail and others conveniently chose to ignore. However, Carney clarified his comments on BBC Radio 4 the next morning by pointing out that the increase in labour supply is down to British workers taking more hours, and older workers staying in employment, and that over the last two years, increases in those two factors have been 10 times more important than migrants. In other words, you can blame your colleagues that stay late every day and refuse to retire for your stagnating wage.

Shortly after that clarification, the headlines began to look much more sensible: The Independent ran a story titled, “Bank of England governor Mark Carney says UK productivity not harmed by migrant workers.” Business Insider bluntly headlined its story, “No, Mark Carney is not anti-immigration.”

Of course it’s almost absurd that Carney, a foreigner who came to work in the UK, even has to defend himself against anti-immigration allegations. Still, what happened to him can happen to any business or prominent individual. The media can, and will, twist the truth. So that’s why it’s important to note that the Bank of England responded almost perfectly by having Carney quickly dispel any misunderstandings. In short, Carney and the Bank of England won this battle against bad press because they fought back in a timely fashion with the best weapon possible: The Truth.



This week Abchaps took some special guests to mingle with old friends at City institution Gulls Egg Luncheon at Merchant Taylors Hall; and attended Rushlight’s Cleantech event ‘Getting CCS in the UK to happen’, hosted by Smith and Williamson. Abchaps also headed to the Gorkana Media breakfast briefing with Bloomberg, to hear the Company’s new direction, including the newly launched Bloomberg Europe website and how PRs can use Bloomberg’s services to benefit their clients.

Two of our graduates also attended the next stage of their FinanceTalking training, “Finance Essentials for Communicators” focusing on understanding corporate finance and accounting concepts, as well as learning how to use numbers and KPIs in order to tell a positive financial story. Back at home, we hosted another successful Oil and Gas focused Market Lunch, where it was reassuring to see deals are still being for near term projects with good management teams.



Charles Russell Speechlys promoted Suzi Gatward to real estate Partner, whilst WH Ireland has appointed Roland Kitson Head of Business Development for wealth management. Paul Stevens, who has headed up Olswang’s international intellectual property practice group since 2013, was appointed Chief Executive of the law firm.



“Quarterly inflation report”: It’s normally about as exciting as the title implies, but this week the Bank of England’s forecast of economic conditions in the UK made headlines for Mark Carney’s supposed anti-immigration rhetoric.



This weekend, the international rugby 7s is coming to Twickenham, so celebrate in a carnival of fancy dress. For this year, the theme is ‘out of this world’. Go big or go home!

If beer, rugby, and aliens aren’t necessarily your thing, the Natural History Museum is holding an afterhours ‘Night Safari’. Seen as time travelling across three centuries, visitors will be able to see this cathedral of knowledge devoid of its usual madding crowds.

Finally, with spring finally showing its face, London’s rooftops are becoming pleasant places to be again. The Rooftop Film Club is one of the best ways of seeing a film, out in the open air, with cocktails and deckchairs.

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Weekly Wrap Up: An Affair to Forget

True to the core values of its business, the company that owns adultery website Ashley Madison has decided to stray from its home market when it goes public. The Toronto-based Avid Life Media made headlines this week when it announced its plans for a London listing this year. But it wasn’t the announcement itself that generated extensive press coverage. It was the Company’s reason for deciding to list in Europe that has received the attention.

The Company’s Head of International Relations, Christoph Kraemer, told Bloomberg that “Europe is the only region where we have a real chance of doing an IPO”. Why is that? Even though half of the adultery site’s users are based in the United States, Kraemer claims they have to list in London because Europe is more tolerant of adultery.

Except that’s not exactly true, according to the Pew Research Centre. In a poll asking respondents if “married people having an affair is morally unacceptable”, 84% of Americans did agree that cheating is bad. And in France, less than half of the respondents condemned affairs, with only 47% agreeing.

Avid Life Media is not, however, planning to list in France. And the UK has much less of a laissez-faire attitude towards infidelity: 76% of those who were asked considered it wrong. That is the same percentage as Canada, and not too far behind the Americans. Simply put, listing in London doesn’t make sense based on society’s attitude towards adultery.

Avid Life Media and Ashley Madison are obviously not concerned with this inconvenient fact. It’s also hardly believable that Ashley Madison is worried about investor morality in the US. Anyone who has seen the Wolf of Wall Street knows that stateside investors wrote the book on immorality. But claiming otherwise gave the story of the Company’s potential listing an angle that was picked up in much of the mainstream media in the US and the UK. It’s simply a tasteless PR strategy – and based on what the Company represents, no one should be surprised by this tactic.

Here’s what’s really happening: Avid Life Media is desperately trying to drum up interest after a failed attempt to raise money in Canada. But even an amateur investor could see that their growth strategy of expanding into new markets is limited – and potentially dangerous. Women will inevitably suffer far greater consequences if caught committing adultery; in many parts of the world it still results in ostracisation and violence. Investors would have to be prepared to accept this uncomfortable truth.

In the UK, Ashley Madison is currently banned from advertising on television because it is not deemed morally justifiable. And given that the UK’s attitude towards this type of business is on par with Canadians, it is likely that Ashley Madison’s attempt to raise money in London will soon be an affair the UK can altogether forget.



This week, Abchaps attended an interesting CIPR Speaker lunch with Ashley Armstrong, M&A Correspondent at The Telegraph. She touched on multiple topics, predicting 2015 to be a good year for M&A and purchasing influence of the Asian market to increase. As well as hosting a successful Malaysia focused Market Lunch, we attended the Election Debate Seminar, chaired by Vincent Wood, business Tax Partner at Moore Stephens. Discussions at the seminar included the truths behind the different parties’ pre-election pledges and asked the question whether the parties can realistically implement them.



Steve Frizell has been appointed Partner in PwC’s UK financial services risk assurance internal audit services team. Meanwhile, Standard Chartered has been promoted to Chief Economist and hired Ding Shuang as Head of Greater China Economic Research from Citigroup. Ian Sadler has become Partner and National Global Compliance and Outsourcing Leader at Baker Tilly.



“Morality” – usually considered the differentiation of intentions, decisions and actions between those that good and those that are bad. Although derived from Latin, this word apparently has a completely different meaning in French.



The Tweed Run is happening on Saturday, which sees cyclists take to the streets in their well-pressed best, cycling past London’s most iconic landmarks kitted out in the far more flattering tweed and brogues, compared to the de rigueur Lycra.

The Southbank Centre have an interesting take on election season, with their Changing Britain series this weekend taking in the period from 1945-1979, a seminal junction in British political life, with the welfare state as we know it today being born.

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