CEO
Connie Mixon is quoted as saying,
“This IPO listing on London's AIM will allow us to capitalize on the early
commercial success we have experienced and pursue our growth strategy of
accelerating the Company’s penetration of key markets. We will focus on
the geographic regions where the Company currently has installed projects and
relationships and execute on and grow the current sales pipeline.”
Overview of IPO Listing on London's AIM
Gainesville,
Georgia-based MyCelx Technologies raised $20 million in its recent IPO on the
London Stock Exchange’s Alternative Investment Market (AIM).
MyCelx
is a clean water technology company focused on the oil and gas, power, marine
and heavy manufacturing sectors. The
Company’s system consists of equipment (a coalescer and/or a polisher) and
consumable filtration media infused with an organic chemical polymer that
creates cohesion, as opposed to provoking separation. The footprint of MyCelx’s system is 25% that
of competing technologies, is cost-effective and achieves better results by permanently
and immediately removing free, emulsified and dissolved hydrocarbons from water
upon contact to levels of 0 - 10 parts per million at any flow rate.
The
Company was co-founded in 1994 by the scientist who invented the polymer and an
experienced oil industry executive. Current
and proposed water quality standards are a key driver for the Company, which
relies on know-how, trade secrets and 36 patents. MyCelx currently has 18 employees, one
temporary employee and five sub-contractors, mainly engaged in engineering and
product management.
Key London AIM Listing Metrics
- $19.7m gross was raised from listing on the London Stock Exchange's AIM, $16.7m net of offering costs, intended to be used for:
- $7.5m – Sales and marketing
- Expand sales force and technical sales team
- Rollout global marketing program to increase general awareness
- Establish sales offices in key locations, the Middle East and Houston
- $4.4m – Operations
- Increase engineering headcount
- Expand equipment rental program
- Expand plant and equipment for manufacturing of consumables
- Fund R&D for potential new applications of the technology
- $4.4m – General working capital
- $0.4m – Repay bank loan
- Offering costs on the London Stock Exchange's AIM amounted to 15.2% of the gross capital raised on London's AIM for the Company
- The offering was underwritten, as opposed to being undertaken on a ‘best efforts’ basis
- London AIM Nominated Broker commission of 4.0%
- Undisclosed corporate finance fee
- Five-year warrant over 1.5% of the enlarged share capital at the London AIM IPO price
- Opening market capitalization upon listing on the London Stock Exchange's AIM of $44.3m
- Dilution to existing shareholders of 44.5%
- Free float on London's AIM of 53%
- Trailing pre-money and post-money revenue multiples on London's AIM of 5.7 and 10.3, respectively
- Trailing pre-money P/E ratio on London's AIM of 82.0[1]
- Trailing pre-money EBITDA multiple on London's AIM of 49.21
Key
Financial Metrics
(in
USD millions)
|
Y/E 12/31/08
|
Y/E 12/31/09
|
Y/E 12/31/10
|
Δ from 2008
|
Δ from 2009
|
Revenue
|
$2.7
|
$2.6
|
$4.3
|
-4%
|
+65%
|
Cost
of Goods Sold
|
0.9
|
1.0
|
2.0
|
+11%
|
+100%
|
Operating
Expenses
|
1.4
|
1.4
|
2.0
|
+0%
|
+43%
|
Net
Income
|
0.4
|
0.2
|
0.3
|
-50%
|
+50%
|
EBITDA
|
0.4
|
0.3
|
0.5
|
-25%
|
+67%
|
Accumulated
Deficit
|
5.4
|
5.3
|
4.9
|
N/A
|
N/A
|
Cash
and Cash Equivalents
|
0.1
|
0.0
|
0.2
|
N/A
|
N/A
|
The
Company’s revenues are concentrated with a small number of customers; with 53%,
51% and 33% of 2008, 2009 and 2010 revenues, respectively, earned from five,
six and three customers, however, these customers pose very low non-collection
risk. Since the London Stock Exchange AIM IPO completed within
nine months of the latest audited financial statements, unaudited, comparative
stub period financials were not required and the Company chose to not provide
updated management accounts.
Shareholder Base
The
Company had 6.5m shares outstanding prior to the London Stock Exchange AIM IPO, issued 0.4m shares in
exchange for a $1.5m IPO bridge loan from one of the Founders of the Company,
issued 0.2m shares in connection with the Company’s Performance Incentive Plan and
issued 5.8m shares for cash in the London AIM IPO, leaving the Company with 12.9m shares
outstanding. The table below details
those who held 3% or more of the Company prior to and/or after the London Stock Exchange AIM IPO, along
with the collective ownership of the Other Historic Investors, the Other Directors
and the Other New U.K. Investors.
Shareholder
|
Pre-IPO
%
|
Post-IPO
%
|
Founders
|
35.18
|
20.63[2]
|
Chief
Executive Officer
|
15.27
|
7.462
|
Private
Investment Company
|
9.96
|
5.05
|
Former
Director
|
7.00
|
3.55
|
Family
Office
|
3.94
|
1.99
|
Family
Trust
|
3.09
|
1.57
|
Other
Historic Investors
|
19.10
|
10.60
|
Other
Directors
|
6.46
|
4.722
|
London
Institutional Investor (Fund Manager)
|
-
|
16.952
|
London
Institutional Investor (Fund Manager)
|
-
|
7.41
|
London
Institutional Investor (Fund Manager)
|
-
|
5.53
|
London
Institutional Investor with a U.S. Parent (Fund Manager)
|
-
|
3.68
|
Edinburgh
Institutional Investor (Fund Manager)
|
-
|
3.68
|
Other
New U.K. Investors
|
-
|
7.18
|
Totals
|
100.00
|
100.00
|
The
Company was closely held by the Founders and “Friends and Family”. All of the pre-IPO investors retained their
shareholdings and were simply diluted as a result of the new shares issued in
the London AIM IPO.
An
important element of MyCelx Technologies' London AIM IPO was its ability to raise $5.8m of the $19.7m from
tax-advantaged Venture Capital Trust (VCT) and Enterprise Investment Scheme
(EIS) investors. In order for the
Company to become eligible for VCT and EIS investors, MyCelx had to, amongst
other things, create a permanent presence in the U.K., which was achieved by
appointing a U.K. Business Development Manager with the authority to enter into
binding contacts on behalf of the Company.
This individual will be focused on developing business opportunities in
the U.K. (i.e. the North Sea) and servicing projects in the Middle East. Until appropriate permanent office space is
identified and contracted, the Company’s ‘permanent establishment’ will be located
within their U.K. lawyers’ offices.
Beyond
the obvious benefit of the Company listing on London's AIM and raising growth capital in the London AIM IPO, is that the Company now has a more
diversified shareholder base from which to create post-IPO liquidity on the London Stock Exchange's AIM and new U.K.-based
investors to diversify the risk of any future financings on London's AIM. As a public company listed on London's AIM, MyCelx’s corporate
standing and profile will be raised and its Performance Incentive Plan will be
more attractive to existing and prospective employees and Board members.
London AIM Board of Directors and
Corporate Governance
The
Board of Directors consists of three Executive Directors (one of the Founders,
who is also the President and Chief Science Officer, the CEO and the CFO) and six
Non-Executive Directors (an Independent Chairman, two Independent NEDs, two
non-Independent NEDs and the other Founder as Vice Chairman); all with solid
resumes and a good blend of complementary experiences and skill sets. The Board is required to meet at least four
times per year.
Companies
listed on the London Stock Exchange's AIM are not required to comply with the U.K. Corporate Governance
Code, which is mandatory for companies listed on the Main Market of the London Stock Exchange (LSE); however, London AIM-listed companies typically commit to complying with its main provisions, where
practical, and/or the Corporate Governance Guidelines for Smaller Quoted
Companies published by the Quoted Companies Alliance. While the foregoing is commonplace, even for London Stock Exchange AIM-listed
companies that do not re-domicile into the U.K., MyCelx chose to remain subject
to the corporate governance requirements of the State of Georgia.
The
Company has established an Audit Committee, a Compensation Committee, a
Nomination and Governance Committee and an Executive Committee. Each committee consists of two or three members
with the only representation from the Executive Directors being the CEO on the Executive
Committee.
London AIM Accounting Considerations
Since
the Company remained incorporated under the laws of the State of Georgia and
did not re-domicile into a European Economic Area country, which includes the
U.K., they chose to report using U.S. GAAP.
While, not required, a summary of the relevant differences between U.S.
GAAP and IFRS was provided.
The
U.K. Member Firm of an international accountancy network acted as Reporting
Accountant while the U.S. Member Firm of another international accountancy
network audited the 2008 - 2010 financials.
Since the 2010 financials were less than nine months old, unaudited,
comparative stub periods were not required and the Company chose to not provide
updated management accounts.
An
unaudited pro forma statement of net assets is never required in connection
with a London Stock Exchange AIM IPO and was not provided in this instance since the Company only
repaid a small bank loan and satisfied a small London AIM IPO bridge loan from one of the
Founders via the issuance of shares; therefore, the effect of the net proceeds
from the London AIM IPO and the debt/equity swap on the net assets of the Company is
obvious.
London AIM Legal Considerations
While
the Company remained incorporated under the laws of the State of Georgia, its
constitutional documents were amended to incorporate two of the three most
important elements of English corporate law as follows:
- Notifiable Interests – Shareholders are required to notify the Company of, and the Company is required to publicly announce, holdings at or above the 3% level and whenever a full percentage point is breached in either direction.
- Takeovers (i.e. mandatory offer) – If any party, or parties acting in concert, accumulates a holding of 30% or more, they must make a cash offer to the other London AIM shareholders at the highest price they paid for the Company’s shares listed on London's AIM during the last 12 months.
The
other important element of English corporate law that was not amended in the
Company’s constitutional documents relates to pre-emption rights (i.e.
anti-dilution). English companies
typically provide London AIM shareholders with the right to participate in the issuance of
shares on London's AIM for cash of more than 10% of the then outstanding shares listed on London's AIM during any
12-month period; however, obtaining the required 75% shareholder approval waiving
such right is commonplace. As a
middle-ground solution, the Company intends to consult with its London AIM Nominated Adviser (Nomad), as to whether or not its London AIM shareholders should be provided with the
opportunity to participate, any time it proposes to offer new shares on London's AIM for cash.
The
Company relied on the safe harbor afforded by Regulation S of the U.S.
Securities Act of 1933 so as to not have to file a registration statement with
the U.S. SEC. Shares subject to Reg. S
(generally, those issued in the London Stock Exchange AIM IPO for a period of one year, issued within one
year of the London AIM IPO and/or held by affiliates) are not eligible for
dematerialization and, as such, are always held and traded in certificated
form.
Since
the Company did not re-domicile into the U.K. or one of its Crown Dependencies,
the Channel Islands and Isle of Man, its shares listed on London's AIM that are not subject to Reg. S are
not eligible for trading within CREST; the most common electronic system for
the holding and transfer of London AIM-listed shares in the U.K., however, a Depository could be
appointed and Depository Interests (DIs) could be created, allowing for the immediate
trading of these non-Reg S. DIs with CREST.
The Company has, however, arranged for its registrar, in its capacity as
Depository, to issue DIs for the shares issued in the London Stock Exchange AIM IPO, a subset of the Reg.
S shares, upon the expiration of the one-year distribution compliance period
and upon the provision of proper instructions from the shareholder(s) to the transfer
agent and registrar.
Other
Given
the nature of the Company’s business, clean water technology largely focused on
the oil and gas sector, two Experts’ Reports were prepared; one of a commercial
due diligence nature, a market assessment for oil and gas produced and the
treatment of waste water, and the other on the Company’s intellectual property
position.
