CEO David Richards said, "I am delighted with the success of our significantly oversubscribed London AIM IPO and with the strong, supportive response we have received from our new, blue-chip, London-based, AIM Institutional Shareholders. We have a clear strategy for growth and the funds raised through our London Stock Exchange AIM IPO will help us deliver on that strategy; opening up new markets, developing new products and creating new possibilities for WANdisco and its customers."
The London Stock Exchange's Head of AIM, Marcus Stuttard, said, "WANdisco's London AIM IPO is a great example of how London's AIM supports innovative, fast-growing companies in delivering on their global growth aspirations. Raising equity capital on London's AIM is the ideal mechanism for ambitious companies looking to fund innovation and growth."
Overview of Listing on London's AIM
Sheffield,
England and San Ramon, California-based WANdisco (Wide Area Network Distributed
Computing) raised $29 million ($24 million for the Company and $5 million for
the Founders) in its recent IPO on the London Stock Exchange’s Alternative
Investment Market (AIM).
WANdisco
provides global collaboration software to the software development
industry. Organizations with globally
distributed software engineering teams have to deal with issues such as network
latency and inconsistent availability, restrictions on scalability and
security. WANdisco’s differentiated,
patent-pending technology, the Distributed Coordinated Engine (DConE), provides
a cost-effective solution to these problems by changing the way servers
interact over a WAN, enabling geographically distributed servers to stay
continuously synchronized. The Company
has over 200 customers, across a broad range of industries, many of which are
household names, such as, Hewlett Packard, Johnson & Johnson, Intel,
Lockheed Martin, Sun Microsystems, Barclays, AT&T, Honda, John Deere and
Wal-Mart.
The
Company was founded in San Ramon, California in 2001 and moved its corporate
headquarters to Sheffield, England in 2008, effectively using Northern England
as an offshore development center since 78% of the Company’s revenues are
derived from customers based in the United States. WANdisco has 49 employees, 36 in Sheffield
and 13 in San Ramon, with 27 focused on research and software development, 16
engaged in sales and marketing and six attending to financial, administrative
and internal systems support. The
Company plans to further exploit its existing technology in adjacent customer
markets, vertical industries and internationally, with a particular focus on
China, Asia more generally, and apply its DConE technology to significant new markets,
including the Big Data market.
Key London AIM Listing Metrics
- $28.8m gross was raised on the London Stock Exchange's AIM, $24.0m for the Company and $4.8m for the Founders
- $20.0m, net of offering costs, was raised on London's AIM for the Company intended to be used for:
- $9.7m – General working capital and potential complementary technology acquisitions
- 6.0m – Developing an offering, leveraging its core technology, in the Big Data market
- 2.5m – Expanding the sales force
- 1.0m – Continuing product development and management
- 0.8m – Opening an office in China to target the Asian market opportunity
- Offering costs on the London Stock Exchange's AIM amounted to 16.7% of the gross capital raised for the Company
- The offering was undertaken on a ‘best efforts’ basis, as opposed to being underwritten
- Nominated Broker commission of 4.5%
- Corporate finance fee of £250k ($400k)
- Three years of financial audits caused the London AIM offering costs to be higher than usual
- Opening market capitalization on London's AIM of $59.2m
- Dilution to existing shareholders on London's AIM of 40.5%
- Free float on London's AIM of 57%
- Trailing pre-money and post-money revenue multiples on London's AIM of 9.0 and 15.2, respectively
- Forecasted 2012 revenue growth rate of 46%
Key Financial Metrics
(in
USD millions)
|
Y/E 12/31/09
|
Y/E 12/31/10
|
Y/E 12/31/11
|
Δ ’09 - ‘10
|
Δ ’10 - ‘11
|
Revenue
|
$2.5
|
$3.0
|
$3.9
|
+20%
|
+30%
|
Cost
of Goods Sold
|
0.6
|
0.6
|
0.3
|
+0%
|
-50%
|
Operating
Expenses
|
4.0
|
4.2
|
4.7
|
+5%
|
+12%
|
Interest
Expense
|
0.1
|
0.1
|
0.1
|
+0%
|
+0%
|
Net Income/(Loss)
|
(2.2)
|
(1.9)
|
(1.2)
|
+14%
|
+37%
|
Earnings/(Loss)
BITDA
|
(1.8)
|
(1.0)
|
0.1
|
+44%
|
+110%
|
Total
Assets
|
1.8
|
1.5
|
2.6
|
-17%
|
+73%
|
Deferred
Income
|
3.4
|
3.7
|
4.5
|
+9%
|
+22%
|
Accumulated
Deficit
|
3.3
|
5.1
|
6.0
|
N/A
|
N/A
|
Cash
and Cash Equivalents
|
0.5
|
0.1
|
0.1
|
N/A
|
N/A
|
The
Company’s revenues were derived two-thirds from the United States and one-third
from Europe during 2009 and 2010; however, there was a dramatic shift during
2011 with 78% from the United States, 17% from Europe and 5% from the
rest-of-the-world. Furthermore, the
Company’s revenues became less concentrated during 2011 with only one customer
accounting for more than 10%, at 17%, whereas during 2009 and 2010, two
customers accounted for an aggregate of 35%.
Since the London 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, however, the
house broker is forecasting 2012 revenue growth of 46%, to $5.7m, EBITDA of
$0.6m and a small pre-tax loss.
London AIM Shareholder Base
The
Company had 12.2 million shares outstanding prior to the London Stock Exchange AIM IPO and issued 8.3 million
shares for cash in the London AIM IPO, leaving the Company with 20.5m shares outstanding. The table below details those who held 3% or
more of the Company prior to and/or after the London AIM IPO, along with the collective ownership
of the Other Historic Investors and the Other New U.K. Investors.
Shareholder
|
Pre-IPO
%
|
Post-IPO
%
|
Founders
(Chairman/CEO, COO and Chief Scientist)
|
83.05
|
|
Chief
Architect
|
6.90
|
3.372
|
Former
CTO
|
4.55
|
2.71
|
Other
Historic Investors
|
5.50
|
3.26
|
Director
|
-
|
0.541
|
London
Private Client Broker (PCB)
|
-
|
5.41
|
London
Institution (Pension and Insurance Funds) and PCB
|
-
|
5.41
|
Global
Institution (Various Funds) and PCB
|
-
|
5.41
|
London
Institution (Pension and Charity Funds) and PCB
|
-
|
3.50
|
Global
Institution (Various Funds) and PCB
|
-
|
3.50
|
London
and Edinburgh Institution (Various Funds) and PCB
|
-
|
3.50
|
London
Institution (Insurance Funds) and PCB
|
-
|
3.50
|
London
PCB (Venture Capital Trust Fund)
|
-
|
3.50
|
Edinburgh-based
Global Institution (Various Funds)
|
-
|
3.50
|
Other
New U.K. Investors
|
-
|
10.79
|
Totals
|
100.00
|
100.00
|
The
Company was closely held by the three Founders and other employees. An interesting element of WANdisco’s London AIM IPO was
its ability to raise 10% of the $28.8 million from tax-advantaged Venture
Capital Trust (VCT) and Enterprise Investment Scheme (EIS) investors. In order for a company to be eligible for VCT
and EIS investors, it must, amongst other things, create a permanent presence
in the U.K., which wasn’t an issue for
WANdisco since its corporate headquarters is in Sheffield.
Beyond
the obvious benefit of creating $4.8 million of immediate liquidity by listing on the London Stock Exchange's AIM for the
Founders and Chief Architect to satisfy the Promissory Notes issued as
consideration for the options they exercised, the Company now has an adequate
amount of growth capital for product and geographic expansion and a solid base
of blue-chip London AIM Institutional Investors from which to create additional post-IPO
liquidity and raise additional capital on the London Stock Exchange's AIM, if necessary. In addition, the Company believes that its
London AIM IPO and public market status on London's AIM will raise its profile in the sector,
providing comfort to existing customers and assisting in securing new
customers. Finally, as a London AIM-listed company,
WANdisco’s Share Option Plans will be more attractive and provide greater
incentives 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 (two of the three Founders,
one acting as Chairman and CEO and the other acting as COO, and the CFO) and two
Non-Executive Directors (both NEDs are considered independent); all with solid
resumes and a good blend of complementary experiences and skill sets. The Board will meet at least six 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; however, as
is typical, the Company intends to follow, to the extent appropriate for its size
and nature, the Corporate Governance Guidelines for Smaller Quoted Companies,
which are published by the Quoted Companies Alliance. Since the role of Chairman and CEO are held
by the same individual, in contravention of the Corporate Governance
Guidelines, the NEDs will meet annually to discuss the performance of the
Chairman.
The
Company has established Audit, Remuneration and Nomination Committees. The Audit and Remuneration Committees are
chaired by a NED, with the other NED serving as a member, along with the COO
being a member of the Audit Committee and the Chairman and CEO being a member
of the Remuneration Committee. The Nomination
Committee is chaired by the Chairman and CEO with all of the other Directors
being members. The Audit Committee will meet formally at least four times a
year and the Remuneration and Nomination Committees are expected to meet not
less than two times a year.
London AIM Accounting Considerations
Since
the Company is domiciled in Jersey, which is one of the two bailiwicks
comprising the Channel Islands, a Crown Dependency of the U.K., and the U.K. is
a European Economic Area country, the Company is required to report using
IFRS. Since all of the Company’s
revenues are earned in U.S. Dollars, the U.S. Dollar is the functional currency
and was also chosen as the reporting currency.
The
U.K. Member Firm of an international accountancy network acted as Auditor and Reporting
Accountant. Since the audited 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 and was not
provided in this instance since the effect of the net proceeds from the London Stock Exchange AIM IPO
on the net assets of the Company is obvious.
London AIM Legal Considerations
Since
the Company is not incorporated in the U.K., but rather in Jersey, which is one
of the two bailiwicks comprising the Channel Islands, a Crown Dependency of the
U.K., the three most important elements of English corporate law do not
automatically apply. As is customary,
the Company amended its constitutional documents for these three main
differences as outlined below, except for the fact that the U.K.’s City Code on
Takeovers and Mergers does automatically apply by virtue of the fact that the
Company’s ‘place of central management and control’ is deemed to be in the U.K.
- Pre-emption rights (i.e. anti-dilution) – Shareholders may participate in, or the Company has to obtain approval from at least 75% of them for, the issuance of shares for cash on London's AIM of more than 10% of the then outstanding shares during any 12-month period.[3]
- 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 during the last 12 months.
The
London Stock Exchange AIM IPO was not subject to Regulation S of the U.S. Securities Act of 1933;
therefore, the AIM-listed shares are eligible for dematerialization and trading within
CREST, the most common electronic system for the holding and transfer of shares
in the U.K. As such, it was not
necessary to appoint a Depository and create Depository Interests, as would be
the case for a company domiciled outside the U.K. or one of its Crown
Dependencies, the Channel Islands or Isle of Man.
Other
The
Company’s AIM Nominated Adviser (Nomad) did not require the preparation of any Experts’ Reports;
however, certain information contained in the AIM Admission Document was sourced
from Gartner. As far as the Company and
Directors are aware and are able to ascertain from the information published by
Gartner, no facts have been omitted which would render the reproduced
information inaccurate or misleading.
[1] Subject to a 12-month lock-in and customary
orderly market provisions on London's for a further 12 months.
[2] In addition to the dilutive effect of the new
capital raised from the London AIM IPO, they sold some of their shares and raised $4.8
million, half of which was used to satisfy Promissory Notes issued by the
Company as a result of exercising options a few months prior to the London Stock Exchange AIM IPO,
effectively a cashless exercise with a few month delay, and the other half was
used to satisfy their personal tax liabilities.
[3] This is the typical level at which London AIM-listed
companies seek an annual standing authorization from their shareholders for the
issuance of additional shares for cash on London's AIM.
This flexibility increases the certainty and speed of small capital
raises during the year and reduces transaction costs, since further
communications with, and approvals from, shareholders are not required.
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