Fair share

Chief executive Gavin Oldham is passionate about universal share ownership – so much so that Share Plc targeted its AIM offer for subscription at its personal investor customers.


Chief executive Gavin Oldham is passionate about universal share ownership – so much so that Share Plc targeted its AIM offer for subscription at its personal investor customers.

It would be fair to say that Share Plc’s admission to AIM may not be the blueprint for ambitious CEOs of growth companies looking to float. The parent company of retail stockbroker The Share Centre raised £1.08 million at 27p per share last month, valuing the company at £43.2 million. However, flotation costs have claimed a sizeable chunk of Share’s takings – over 75 per cent.
 
Taking a company to AIM these days is a nerve-wracking experience as more and more flotation-ready companies abandon their IPO plans, discouraged by uncertain market conditions. However, diminishing IPO activity is not unique to London’s junior market.
 
As the number of AIM new issues dropped to 41 during the first four months of the year – down from 76 during the same period last year – Nasdaq also faltered, with new listings tumbling to 25 from 85 in the corresponding period in 2007.
 
Despite worldwide IPO inertia, Share chief executive Gavin Oldham says he never considered shelving their listing plans, which were put in place early last year: “The overall market isn’t very welcoming at the moment for AIM companies, but this has given us more of a focus because we were one among comparatively few listings, and in the process this has given us more profile. But let’s face it, the costs of an issue are humungous.”
 
Eyeing new business
 
Raising capital wasn’t the only motivation behind the listing, says Share FD Richard Stone: “One of the main purposes of going to market at this time was to increase our ability to use our shares as currency for future acquisitions.” He adds that the company is eager to pursue acquisitions that will broaden existing areas of business and provide complementary services to its customers.
 
The parent company of a number of subsidiaries involved in investment activities, Share’s main business is The Share Centre, which provides personal investor services and conducts 70 per cent of its business online.
 
Since it was founded in 1991, Share has entered a range of new markets, such as investment fund management and administration, and ‘white labelling’ or branded share services. It has evolved into a profitable business through strong organic growth and a number of bolt-on acquisitions.
 
Key additions have been Bradford & Bingley Corporate PEPs, bought in 1999. This was followed by retail and internet stockbroker Stock Academy in 2002. The Cambridge-based business brought Share new white-labelled clients such as  Virgin Money.
 
Share’s results for 2007 show a ten per cent increase in revenues, from £10.6 million to £11.7 million. Operating profit increased from £1.1 million to £1.2 million; however, pre-tax profits dropped from £3.4 million to £3.3 million owing to a lower level of gains being realised from the sale of London Stock Exchange shares.
 
Retail public offer
 
The Aylesbury business selected nomad and broker KBC Peel Hunt to shepherd it through the admission process last month. Other advisers included reporting accountant Deloitte and law firm Dechert.
 
Guy Wiehahn of KBC’s corporate team claims that the total cost – approaching £850,000 – is the going rate for an AIM admission. “What Share did was pretty complicated,” he says.
 
By “complicated”, Wiehahn is referring to Share’s public offer to retail investors, the launch of a free share offer to Share Centre customers who subscribe to or transfer in a full-value ISA, and  the granting of shares to staff through its Share Incentive
Plan (SIP).
 
“Share elected to tap its existing customer base for money, and based on the level of subscriptions, its customers have been incredibly supportive.
“Share’s admission was distinct from a typical IPO – virtually always done with institutional investors – as it was aimed at personal investors. More recently, companies haven’t followed the retail public offer route because it’s more expensive,” observes Wiehahn.
 
The nomad and broker claims that in some instances costs can swell when a prospectus is required in addition to the AIM admission document. However, Share was able to take advantage of an EU exemption waiving this requirement as the fundraising would total less than €2.5 million (£2 million).  
 
Going to market
 
It’s clear that Oldham is passionate about share ownership as he slates the dilutive effect of the recent batch of bank rights issues, which have given shareholders the right to buy new shares at a discounted price.
 
The Share Centre targets what he terms a “populist” market; that is, high volumes of personal investors. The company ethos of “more people enjoying straightforward investing” is important to Oldham, who believes this was reflected in its retail offer for subscription.
 
“A significant proportion of the people who invested in our retail offer for subscription were our customers: people who know our company and its services and appreciate the value that it offers. They are therefore willing to put their hands in their pockets and buy shares because they see it as a good investment.”
 
He believes that growth companies looking to raise funds on AIM should feel confident about targeting their market, as Share did during the fundraising process, rather than following the tried and tested path of an institutional placing.
 
As a result, the offer was four times oversubscribed and a million shares changed hands in the first two days of trading. “We saw the oversubscription as a huge vote of confidence in what we do,” says Oldham. “It’s unfortunate that our customers had to be scaled back on their applications because there were only a certain amount of shares available.”
 
Iain Wallace, group compliance and legal services director, is more pragmatic: “I think it’s important for companies not to run headlong into a listing on AIM. There are other junior markets out there, including our own market, Sharemark, and PLUS Markets. If you are based in the West Midlands, there’s Investbx. I think companies should think about the stage they are at in their lifecycle and pick the appropriate market accordingly.”
 
Alternative markets
 
Sharemark is operated by Share and was launched in June 2000 by the company to trade its own shares. Since this time, the number of stocks trading on the small company stock market has risen to 18, typically with market capitalisations of between £650,000 and £60 million.
 
Sharemark-quoted companies include City Lofts, a former AIM property development company; Getmapping, a provider of digital aerial photography; and Countrywide, the £120-million-turnover farming and rural supplies business.
“Sharemark is really for companies that want to take the first step in having their shares publicly traded. It’s a market that is cost effective and fairly lightly regulated, and a stepping stone to a more senior market,” says Wallace.
 
He believes that trading on Sharemark for the last eight years prior to the AIM listing prepared the ground for the step up to a senior stock market: “It was easier to go on to AIM as the company had already reached a high standard of compliance and governance through Sharemark.”
 
Trading liquidity
 
AIM has been under attack for its lack of liquidity, which the London Stock Exchange has recently tried to tackle with the launch of its own issuer-paid equity research service, set up to help smaller companies attract more interest from investors.
However, Share hasn’t faced problems of liquidity as it has amassed more shareholders through its retail offer than it would have if it had gone down the institutional investor route.
 
“AIM companies are so focused on the primary fundraising and the process of getting the documents ready that they don’t focus enough on who will own their shares and how they will be traded after they go on to the market,” observes Oldham.
“We were always going to go ahead with the introduction in order to increase the liquidity of our shares – they are also traded on Sharemark. We’re old hands at this; a good spread of ownership helps liquidity.”

Marc Barber

Raven Connelly

Marc was editor of GrowthBusiness from 2006 to 2010. He specialised in writing about entrepreneurs, private equity and venture capital, mid-market M&A, small caps and high-growth businesses.