AS I SEE IT: TERRY MURDEN says Scottish companies ought to construct an affinity with the stock market
Scotland is prone to re-gain a few FTSE 100 constituents this week when Abrdn and Weir Group full their rehabilitation. Unfortunately, three companies will quickly be misplaced from the stock change amid considerations that newcomers could also be discovering it powerful to fulfill the calls for of the general public markets.
In Abrdn’s case, promotion will symbolize a reversal of fortune for a corporation that misplaced 40% of its shares as much as its relegation from the index in September, and for CEO Stephen Bird who has endured some aggressive interrogation of his reshaping and rebranding technique that raised questions on its long-term future as an unbiased enterprise.
Among these anticipated to depart the market subsequent month is Parsley Box, chaired by Scottish businessman Chris van der Kuyl, which was floated in March final yr however misplaced virtually its whole worth on the Alternative Investment Market in lower than 18 months due to a flaky technique, a collection of weak buying and selling updates, and an unwillingness of traders to pour good cash after dangerous.
It says it should search to lift capital by means of the personal sector, a message echoed final week by Glasgow knowledge firm DeepMatter which can also be cancelling its shares after traders suggested that it might extra simply increase cash as a non-public firm.
Scotland’s relationship with the stock market has at all times been a testing one. Big names such as Bank of Scotland and Scottish Widows (now each a part of Lloyds) and General Accident (absorbed into what grew to become Aviva) as soon as graced the market columns together with a smattering of whisky companies such as Highland Distillers and Macallan. Stagecoach left earlier this yr and will probably be joined by the anticipated departure of sausage pores and skin producer Devro, following a £540m agreed bid from a European group.
It leaves an already skinny group of Scottish quoted firms wanting much more threadbare. One easy idea why so few Scottish companies take the stock market choice has been that rising entrepreneurs within the larger London space usually tend to have established contacts, even household hyperlinks, within the City and be conversant in the routine, whereas Scots see it as one thing different firms do.
Scots historically sourced development capital from financial institution debt, although there was a rising attraction in taking the fairness route, albeit primarily personal, which is prone to develop into extra widespread as rates of interest rise.
This development was mirrored in latest figures from the British Business Bank displaying £411m was invested in rising Scottish companies between January and June. This is greater than the identical interval final yr, which means volumes are on monitor to exceed final yr’s document of £540m, regardless of expectations of a slowdown within the second half.
As Paddy Graham of BGF informed me not too long ago, firm house owners are additionally being urged to promote extra fairness relatively than promote their firms.
He says firms promote too early and by promoting extra fairness he says they’ll scale up their enterprises and share a much bigger bounty once they do determine to exit, both by means of a commerce sale – or perhaps a flotation, additionally identified as an preliminary public providing (IPO).
Sentiment in the direction of a market itemizing shouldn’t be helped when tales emerge of share costs collapsing, and all of an organization’s affairs being forcibly aired in public.
Despite considerations over the price of floating, sustaining a list and having to commit sources to the itemizing authorities, there are good issues about being a public firm. For starters, it places the enterprise on the radar of everyone from traders to prospects. At the very least, the common media protection is free publicity.
Generally talking, it has not been a classic interval for IPOs – Deliveroo and Made.com had been amongst these which have suffered a troublesome reception from traders – although it’s hardly ever the market that’s at fault.
Calnex Solutions, the Linlithgow telecoms tools agency, and the Renfrewshire monetary markets software program agency Beeks Financial Cloud, are two of the newer Scottish IPOs which are thriving as public firms as a result of they’ve constructed a strong presence in increasing sectors. Put merely, an organization’s capability to ship its guarantees will decide whether or not its worth soars or sinks.
The stock market could also be a brutal atmosphere, but it surely hardly ever deceives.
tmurden@dailybusinessgroup.co.uk
Terry Murden held senior positions at The Sunday Times, The Scotsman, Scotland on Sunday and The Northern Echo and is now editor of Daily Business
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