Four of the seven U.S. company IPO listings on the London Stock Exchange's AIM are
featured in this post, with pre-money revenue multiples range from 4.5 to
5.7. The relative surge of U.S. companies completing IPOs on London's AIM since
2005 is expected to continue, with the current U.S. market share of 5% of the
1,100 companies listed on London's AIM rising to 10% by the end of the decade.
Highlights
- U.S. companies account for 16% (7 of 45) of London Stock Exchange AIM IPOs during 2011
- More than any other country, except the U.K.
-
Four
of the seven U.S. company London Stock Exchange AIM IPOs during 2011 are featured in this newsletter
- Spectra Systems - Providence, Rhode Island - Industrials
- Raised $22.8m, Market Cap $55.5m, Pre-Money Revenue Multiple 4.5
- MyCelx Technologies - Gainesville, Georgia - Oil & Gas
- Raised $19.7m, Market Cap $44.3, Pre-Money Revenue Multiple 5.7
- Port Erin Biopharma Investments - West Coast - Biotechnology
- Raised $4.8m for investment in private and public biopharma companies
- TLA Worldwide - California and New York - Media
- Raised $28.8m in equity and debt to effect acquisitions valued at $54.5m
- 2005 - 2007, U.S. companies account for 8% (50 of 589) of ‘operating company’ London AIM IPOs
- 2008 - 2011, U.S. companies account for 12% (12 of 104) of ‘operating company’ London AIM IPOs
- London AIM Investors remain cautious and risk adverse, desire exposure to US$ assets/revenue
- London AIM investors seek high-quality, growth-oriented companies from developed markets
- Currently 5% (56 of 1,143) of the companies listed on the London Stock Exchange's AIM are from the U.S.
- End-of-decade expectation is that 10% of London's AIM will consist of U.S. companies
- Given market conditions, prospective issuers should carefully consider:
- Suitability before embarking on the London AIM listing process
- Key advisers, most notably AIM Nominated Advisers (Nomads) and AIM Nominated Brokers
- Of which, there are 60 and 100, respectively
- £557m raised from secondary offerings on London's AIM for 42 U.S. companies listed on London's AIM since 2009
- 75% of all U.S. companies listed on London's AIM have completed at least one secondary offering on London's AIM since 2009
- Industry and geographic dispersion of the 56 U.S. companies listed on London's AIM below
U.S. Company London AIM IPOs - Macro View
The tables below for the entire London Stock Exchange's AIM show that IPOs on London's AIM held steady during 2011 and that ‘operating companies’
continued their return to London's AIM, accounting for 84% of the companies and
92% of the gross funds raised. Generally
speaking, compared to 2010, the companies that completed IPOs on the London Stock Exchange's AIM during 2011 were
smaller and stronger and simply required less growth capital.
Entire Market
All Companies
|
Number of
London AIM IPOs
|
Gross Funds Raised
(in £ millions)
|
Average Funds
Raised
(in £ millions)
|
2008
|
38
|
918
|
24
|
2009
|
13
|
610*
|
47*
|
2010
|
46
|
1,017
|
22
|
2011
|
45
|
560
|
12
|
Total
|
142
|
3,105
|
22
|
* Includes two large London AIM IPOs focused on acquiring
distressed real estate and commercial businesses. If excluded, London AIM IPO funds raised drops to £248m.
Entire Market
‘Operating Companies’*
|
Number of
London AIM IPOs
|
Gross Funds Raised
(in £ millions)
|
Average Funds
Raised
(in £ millions)
|
2008
|
27
|
523
|
19
|
2009
|
3
|
16
|
5
|
2010
|
36
|
723
|
20
|
2011
|
38
|
516
|
14
|
Total
|
104
|
1,778
|
17
|
* Generally excludes SPACs, Investing Companies
and Investment and Real Estate Funds.
Historically, U.S. companies listed on London's AIM have accounted for less than 5%
of London's AIM, however, since 2005, there has been a relative surge of U.S. companies
completing IPOs on London's AIM. From 2005 - 2007
and 2008 - 2011, 8% and 12%, respectively, of all ‘operating company’ IPOs on
the London Stock Exchange's AIM were of U.S. companies. With a
limited number of data points each year, it’s difficult to draw firm
conclusions; however, it is noteworthy that 16% of London AIM IPOs during 2011 were of
U.S. companies. The medium-term
expectation is that U.S. companies listed on London's AIM will account for approximately 10% of all
companies listed on the London Stock Exchange's AIM by decade’s end; growing from 56 to over 100.
United States
All Companies
|
Number of London AIM IPOs
|
Gross Funds Raised
(in £ millions)
|
Average Funds Raised
(in £ millions)
|
2008
|
4
|
123
|
31
|
2009
|
-
|
-
|
N/A
|
2010
|
2
|
52
|
26
|
2011
|
7
|
45
|
6
|
Total
|
13
|
220
|
17
|
United States
‘Operating Companies’*
|
Number of London AIM IPOs
|
Gross Funds Raised
(in £ millions)
|
Average Funds Raised
(in £ millions)
|
2008
|
4
|
123
|
31
|
2009
|
-
|
-
|
N/A
|
2010
|
2
|
52
|
26
|
2011
|
6
|
42
|
7
|
Total
|
12
|
217
|
18
|
While it is encouraging that London Stock Exchange AIM IPO activity has picked up
over the last two years, London AIM IPO activity remains below trend (50 - 150) and is
expected to remain so for the foreseeable future. While London AIM investors remain cautious and risk
adverse, it is clear from the relative surge of U.S. companies completing IPOs
on the London Stock Exchange's AIM since 2005 that they desire exposure to USD assets and revenue streams from
high-quality, growth-oriented companies operating in developed markets.
U.S. Company London AIM IPOs - 2011’s Featured Transactions
The table and summaries below provide some high-level
insights into four of the U.S. company IPOs on the London Stock Exchange's AIM during 2011. Further details can be found by clicking on
the company name, which leads to a comprehensive, four-page summary of each
transaction.
The diversity of the sectors in which these four U.S. companies
listed on the London Stock Exchange's AIM operate is worth noting and reinforces the message to private companies seeking
additional growth capital for the next stage of their development that London's AIM is
open to companies from all sectors. The
three most important factors, in the eyes of prospective U.K. investors, are
the quality of the company’s management team, international operations/plans
and future growth prospects.
In terms of valuation, it appears appropriate to assess
Spectra Systems and MyCelx Technologies using their pre-money revenue
multiples, whereas TLA Worldwide can be assessed using traditional valuation
metrics; the Adjusted EBITDA multiple and P/E ratio.
(in USD millions)
|
||||
AIM Super-Sector
|
Industrials
|
Oil & Gas
|
Healthcare
|
Media
|
Gross Capital Raised
|
$22.8
|
$19.7
|
$4.8
|
$18.82
|
Opening Market Capitalization
|
55.5
|
44.3
|
5.3
|
54.53
|
Revenue
|
7.3
|
4.3
|
N/A
|
11.4
|
EBITDA
|
0.6
|
0.5
|
N/A
|
N/A
|
Adjusted EBITDA
|
0.8
|
N/A
|
N/A
|
5.5
|
Net Income
|
0.4
|
0.3
|
N/A
|
4.94
|
(Multiples/Ratio)
|
||||
Pre-Money Revenue
|
4.5
|
5.7
|
N/A
|
4.8
|
Post-Money Revenue
|
7.6
|
10.3
|
N/A
|
N/A
|
Pre-Money EBITDA
|
54.5[1]
|
49.21
|
N/A
|
N/A
|
Pre-Money Adjusted EBITDA
|
40.11
|
N/A
|
N/A
|
9.9
|
Pre-Money P/E
|
81.81
|
82.01
|
N/A
|
11.14
|
Spectra
Systems invents, develops, manufactures and markets advanced,
technology-based products used to mark, track and authenticate high-value
goods. The Company’s security materials
include proprietary and patented consumables and hardware and software systems
which authenticate bank notes, documents, passports and products such as
pharmaceuticals, software, optical disks and branded luxury goods. The Company’s consumables, hardware and
software often work together as a public and/or covert ‘lock-and-key’ system in
the authentication process. Spectra
Systems was founded in 1996 to commercialize technology licensed from Brown
University, is based in Providence, Rhode Island and has 20 employees. Future growth opportunities are focused on
the United Kingdom, India and China.
MyCelx Technologies 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. MyCelx was co-founded in 1994 by the scientist who invented the polymer and an experienced oil industry executive, is based in Gainesville, Georgia and has 18 employees. Future growth opportunities are initially focused on the Middle East and Gulf of Mexico. An important element of MyCelx’s London Stock Exchange 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.
Port
Erin Biopharma Investments provides a good, generic example of a
London AIM-listed Investing Company, which could be formed for any purpose, however, an
element precedent is association with and/or backing from individuals who are
‘known quantities’ with demonstrable track records of success. In the case of Port Erin Biopharma, the Company’s
Non-Executive Chairman is a renowned global investor, entrepreneur and author
with an estimated net worth of $800 million.
The Company intends to co-invest, wherever possible, alongside its
Chairman in private and public biotechnology and biopharmaceutical companies he
identifies, primarily on the West Coast of the United States. The Company chose to list on London's AIM for its IPO for many of
the typical reasons; AIM’s public profile, its broad investor base, liquidity on London's AIM and
access to London AIM institutional investors.
While the Company’s Chairman is obviously wealthy, as is often the case,
the accumulation of great wealth is the result of intelligence, hard work and
the use of other people’s money, therefore, it is access to the world’s deepest
pool of internationally-focused investors on the London Stock Exchange's AIM that will be most important
over the medium-to-long-term.
TLA
Worldwide was founded to effect the simultaneous acquisition of two
companies; one based in California, founded in 2004, and the other based in New
York, founded in 2000. The purpose of
the acquisitions, and the future strategy, is to capitalize on the opportunity
to consolidate and professionalize the business of baseball athlete
representation and create a full-service offering with the addition of sports
marketing and management. The athlete
representation market is highly fragmented with 60 - 70 groups throughout the
U.S.; with no one group having a market share of athletes greater than
10%. The acquisitions were valued at $55
million, where the eight Members of the acquired LLCs received the entire $26
million of net proceeds from the financing, plus the equivalent of $15 million
in deferred shares, for an eventual 43% stake in the London AIM-listed public Company,
and the potential for earn-out / retention bonus payments of up to $14 million
over five years. Major League Baseball
(MLB) is broadcast in more than 200 countries and 28% of the players (47% of
minor leaguers) were born outside the U.S.
The strong financial performance and complementary nature of the
acquired companies, along with MLB’s strategy to further internationalize the
game, provided the compelling rationale for the London Stock Exchange AIM IPO and valuation. An important element of TLA Worldwide’s London AIM IPO
was its ability to raise $11.3m of the $18.8m from tax-advantaged Venture
Capital Trust (VCT) and Enterprise Investment Scheme (EIS) investors.
U.S. Company London AIM Secondary Offerings
The 56 U.S. companies listed on the London Stock Exchange's AIM account for 4.9% of the
1,143 companies listed on London's AIM and their share of secondary offering
funds raised on London's AIM was quite consistent with that weighting during 2009 and
2010. Over the years, the U.S. companies
listed on London's AIM have accessed capital, grown, and are now more advanced in terms of their stage-of-development
relative to London's AIM as a whole. As such, many
are now self-sustaining and required less growth capital during 2011.
When reviewing the table below for the secondary offering
activity on the London Stock Exchange's AIM as a whole, one anomaly should be adjusted for in order
to arrive at a fair comparison. During
2009, there were three large London AIM Placing & Open Offers which raised an
aggregate of £1.1 billion for real estate investment, development and
management companies. Historically, the
vast majority of secondary offerings on the London Stock Exchange's AIM take the form of Placings and are
much smaller in size. When the
adjustments are made, the aggregate secondary offering funds raised on London's AIM during 2009
drops from £4.9 billion to £3.8 billion and the average drops from £6.38
million to £5.03 million.
Entire Market
All Companies
|
Number of
London AIM Secondaries* |
Gross Funds Raised
(in £ millions)
|
Average Funds Raised
(in £ millions)
|
2009
|
762
|
4,861**
|
6.38**
|
2010
|
691
|
5,738
|
8.30
|
2011
|
524
|
3,616
|
6.90
|
Total
|
1,977
|
14,215
|
7.19
|
* This is the number of discrete secondary
offerings on London's AIM. Some companies
completed more than one secondary offering on London's AIM per year.
** Includes three large
Placing & Open Offers on London's AIM for real estate companies. If excluded, the gross and average drop to
£3,814m and £5.03m.
When reviewing the table below for the secondary offering
activity of the U.S. companies listed on the London Stock Exchange's AIM, one anomaly should be adjusted
for in order to arrive at a fair comparison.
During 2010, one U.S. company listed on London's AIM attracted a strategic investment of £152
million ($243 million), ultimately leading to an outright acquisition. If this large strategic investment is
excluded, the average funds raised from secondary offerings on the London Stock Exchange's AIM drops from £14.53
million to £6.89 million, more in line with the averages for 2009 and 2011.
United States
All Companies
|
Number of
London AIM
Secondaries*
|
Gross Funds Raised
(in £ millions)
|
Average Funds Raised
(in £ millions)
|
2009
|
23
|
184
|
8.00
|
2010
|
19
|
276**
|
14.53**
|
2011
|
17
|
97
|
5.71
|
Total
|
59
|
557
|
9.44
|
* This is
the number of companies that completed secondary offerings on London's AIM as opposed to the
number of discrete secondary offerings on London's AIM.
** Includes one large
strategic investment of £152m. If
excluded, the gross and average drop to £124m and £6.89m.
Of the 59 U.S. companies listed on the London Stock Exchange's AIM that completed secondary offerings
since 2009, 17 completed secondary offerings on London's AIM in more than one year, therefore,
75% of the U.S. companies listed on London's AIM (42 of 56) have completed at least one secondary
offering on London's AIM since 2009.
The distribution of gross funds raised by these 59 U.S.
companies listed on London's AIM is illustrated in the chart below. Since 2009, 86% (51 of 59) of the U.S.
companies listed on London's AIM that have completed secondary offerings on the London Stock Exchange's AIM have raised between £1 and £30
million.
U.S. Company London AIM Selling Shareholder Activity
The ability of existing shareholders to sell some or all of
their holdings in a London Stock Exchange AIM IPO depends on a variety of factors; the most
important of which are the strength of the company and the level of investor
support. Historically, from 2005 – 2007,
22% of U.S. company IPOs on London's AIM included selling shareholders who were often
either founders of the company, longstanding members of executive management or
the board of directors, commercial partners who had made a strategic investment
in the company or VCs/PEGs who invested in and nurtured the company for several
years prior to its London Stock Exchange AIM IPO.
Two of the four U.S. company IPOs on London's AIM during 2008
included selling shareholders. In one of
these transactions, the Chairman and President, who had been with the company
since 1969, sold 30% of his stake for £26 million ($42 million). One of the two U.S. company IPOs on London's AIM
during 2010 included selling shareholders.
In that London Stock Exchange AIM IPO, the selling shareholders included a PEG, a VC, a
Strategic Investor and several Angel Investors for an aggregate of £19 million
($30 million). No U.S. company IPO on
London's AIM during 2011 included selling shareholders.
While selling shareholders are most common in conjunction
with a London Stock Exchange AIM IPO, U.S. company insiders have sold in the aftermarket in organized
transactions on London's AIM on three occasions since 2004; twice as part of secondary
offerings on London's AIM and once on a standalone basis.
In all three instances, the companies were performing exceptionally well
with the organized insider selling driven by a need to “satisfy excess demand”
for the company’s AIM-listed shares. There were no
such transactions from 2009 – 2011; however, insider selling in the normal
course of daily share trading on London's AIM is commonplace.
U.S. Company AIM IPO Accredited
Investor and Qualified Institutional Buyer (QIB) Activity
U.S. accredited investors and QIBs are permitted to
participate in London AIM IPOs and secondary offerings on London's AIM. Historically, from 2005 – 2008, they have
provided 20% of the funding for U.S. company IPOs on London's AIM and 20% of the
secondary offering funds raised on London's AIM for those companies.
From 2009 – 2011, 27% (16 of 59) of the U.S. companies that
completed secondary offerings on London's AIM were at least partially financed by accredited
investors or QIBs, providing 40% of the total funds raised, however, this is
skewed by the £152 million ($243 million) discussed above and would have
otherwise only been 17%.
U.S. Company AIM IPO Industry and Geographic Dispersion
Companies listed on the London Stock Exchange's (LSE) Alternative Investment Market (AIM) are organized into 90 sub-sectors which
feed into 40 sectors which feed into 10 super sectors. The 56 U.S. companies that are listed on London's AIM are
quite diverse and operate in eight of the 10 super sectors (oil and gas / alternative energy, basic materials, industrials,
healthcare, technology, financials, consumer services and consumer
goods).
There is a concentration of oil and gas exploration and
production companies listed on the London Stock Exchange's AIM in Texas, which includes two oil and gas field technology
services companies. The other major
concentration is in industrial and consumer technology companies listed on London's AIM, including; digital media,
biotech and cleantech, between Boston and Washington D.C. and in California.
Industrials is comprised mainly of a wide range of
industrial technology companies listed on London's AIM; from body armor for the military and other
customers to the marking, tracking and authentication of high-value goods to B2B
electronic payment companies listed on London's AIM.
Within Basic Materials, three of the eight U.S. companies listed on the London Stock Exchange's AIM produce
chemicals/compounds for the health and growth of fish, plants and agriculture, three
are mining concerns, one is a forestry investment fund and one is a clean water
antimicrobial technology company listed on London's AIM.
Consumer Services consists of a media company with some
unique technology listed on London's AIM, a restaurant operator and an athlete representation agency. The Consumer Goods company listed on London's AIM is developing fuel
cells for vehicles.
[1] Not
particularly meaningful given the relatively small denominators.
2 In addition to
the $18.8m of equity capital raised from U.K. investors in the London AIM IPO, the company also
secured a $10.0m debt facility from a U.S. bank.
3 Since the
purpose of this London AIM IPO was to effect two acquisitions, this is the value of the
acquired companies, which is more relevant for analysis.
4 Since the
acquired companies were LLCs, this is pre-tax net income. Assuming tax at 40%, net income and P/E ratio
would be 2.9m and 18.8.
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