Three of the four U.S. company London Stock Exchange AIM IPOs during the
first half of 2013 are featured in this post. All achieved
attractive pre-money valuations and two included significant Selling
Shareholders.
The relative surge of U.S. companies completing IPOs on London's AIM since 2005 is expected to continue. U.S. companies currently account for 5% of all companies listed on London's AIM, which is forecast to grow to 10% by the end of this decade.
The relative surge of U.S. companies completing IPOs on London's AIM since 2005 is expected to continue. U.S. companies currently account for 5% of all companies listed on London's AIM, which is forecast to grow to 10% by the end of this decade.
Highlights
- U.S. companies account for 9% (15 of 158) of London Stock Exchange AIM IPOs since 2010
- More than from any other country, except the U.K. (32%)
- Three of the four U.S. company London Stock Exchange AIM IPOs during H1 2013 are featured in this newsletter
- Digital Globe Services - Colorado - Consumer Services - Media Agency
- Raised $20.5m, of which, $12.5m cash exit for the Strategic Investor
- Market Cap $73.9m
- Revenue and EBITDA multiples of 3.3 and 22.0, P/E ratio of 36.6
- Electrical Geodesics - Oregon - Healthcare - Medical Device
- Raised $12.0m, Market Cap $44.3m, Pre-Money Revenue Multiple 2.6
- IBEX Global Solutions - Washington, D.C. - Industrials - Business Support Services
- Raised $22.5m, of which, $5.9m cash exit for the Strategic Investor
- Market Cap $89.9m, Pre-Money EBITDA Multiple 13.8
- 2005 - 2009, U.S. companies account for 8% (66 of 846) of London AIM IPOs
- Since 2010, U.S. companies account for 9% (15 of 158) of London AIM IPOs
- During the first six months of 2013, U.S. companies account for 18% (4 of 22) of London AIM IPOs
- London AIM investors remain selective but desire exposure to USD assets/revenue
- London AIM investors seeking high-quality, growth-oriented companies
- Currently 5% (58 of 1,085) of the companies listed on 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
- London AIM IPO market remains selective, therefore, prospective issuers should carefully consider:
- Suitability for London's AIM before embarking on the London AIM listing process
- Key London AIM IPO advisers, most notably AIM Nominated Advisers (Nomads) and AIM Nominated Brokers
- Of which, there are 50 and 100, respectively
- £415 million raised from secondary offerings on London's AIM for 33 U.S. companies since 2010
- 57% of all U.S. companies on London's AIM have completed at least one secondary since 2010
- 64% of secondary offerings on London's AIM raise between £1 million and £10 million
- Selling shareholder activity at the time of a London AIM IPO increases from 25% to 33% since 2010
- U.S. Accredited Investor and QIB participation on London's AIM continues at the historic level of 20%
- Industry and geographic dispersion of the 58 U.S.companies listed on London's AIM - see below
U.S. London AIM-Listed Company IPOs - Macro View
Entire Market |
Number of
London AIM IPOs |
Gross Funds Raised
(in £ millions)
|
Average Funds Raised
(in £ millions)
|
H1 2010
|
16
|
351
|
22
|
H2 2010
|
30
|
666
|
22
|
H1 2011
|
19
|
265
|
14
|
H2 2011
|
26
|
295
|
11
|
H1 2012
|
22
|
200
|
9
|
H2 2012
|
23
|
495
|
22
|
H1 2013
|
22
|
258
|
12
|
Total
|
158
|
2,530
|
16
|
Historically, U.S. companies have accounted for less than 5%
of London Stock Exchange AIM IPOs, however, since 2005, there has been a relative surge of U.S. companies completing IPOs on London's AIM. From 2005 - 2009,
8% of all IPOs on London's AIM were for U.S. companies.
Since 2010, this figure has grown to 9% and during the first six months
of 2013, 18% of all IPOs on London's AIM were for U.S. companies, accounting for 14% of
the gross capital raised. With a limited
number of data points, it’s difficult to draw firm conclusions; however, the medium-term
expectation is that U.S. companies will account for approximately 10% of all
companies listed on the London Stock Exchange's AIM by the end of this decade; growing from 58 to over 100.
United States |
Number of
London AIM IPOs |
Gross Funds Raised
(in £ millions)
|
Average Funds Raised
(in £ millions)
|
H1 2010
|
-
|
-
|
N/A
|
H2 2010
|
2
|
52
|
26
|
H1 2011
|
-
|
-
|
N/A
|
H2 2011
|
7
|
45
|
6
|
H1 2012
|
2
|
55
|
28
|
H2 2012
|
-
|
-
|
N/A
|
H1 2013
|
4
|
37
|
9
|
Total
|
15
|
189
|
13
|
While London Stock Exchange AIM IPO investors remain selective, it is clear from the
relative surge of U.S. companies completing IPOs on London's AIM since 2005 that they
desire exposure to USD assets and revenue streams from high-quality,
growth-oriented companies.
U.S. London AIM-Listed Company IPOs - H1 2013’s Featured Transactions
The table and summaries below provide some high-level
insights into three of the U.S. company IPOs on London's AIM during the first half of 2013.
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 on the London Stock Exchange's AIM in which these three companies operate
is worth noting and reinforces the message to private companies seeking
additional growth capital for the next stage of their development that the London Stock Exchange'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 USD millions)
|
|||
Industry Sector |
Consumer Services Media Agency |
Healthcare
Medical Device
|
Industrials
Business Support Services
|
Gross Capital Raised
|
$20.5
|
$12.0
|
$22.5
|
Opening Market Cap
|
73.9
|
44.3
|
89.9
|
Revenue
|
20.0
|
12.5
|
136.0
|
EBITDA
|
3.0
|
0.6
|
5.3
|
Net Income
|
1.8
|
0.2
|
1.0
|
Pre-Money
Multiples/Ratio
|
|||
Revenue
|
3.3
|
2.6
|
0.5
|
EBITDA
|
22.0
|
13.8
|
|
P/E
|
36.6
|
161.51
|
73.31
|
Cash Received by
Strategic Investor Selling Shareholder
|
$12.5
|
N/A
|
$5.9
|
Digital
Globe Services provides outsourced online customer acquisition solutions to
large, consumer-facing organizations; mainly U.S. cable companies. The Company procures paid search advertising,
develops and manages branded web sales portals and establishes and maintains
sales contact centers. DGS’s competitive
advantages include its proprietary databases and algorithms for cost-effective
procurement of online advertising and the driving of customer action, expertise
in optimizing websites and contact centers for maximum sales conversion and a
fee-per-sale business model to closely align the economic interests of DGS with
their clients. The Company was founded
in 2008 and is headquartered in Castle Rock, Colorado, however, the vast
majority of DGS’s 427 employees are based in Pakistan. Future growth opportunities are focused on
providing additional services to existing customers, expansion into new
geographical markets, such as Latin and South America, Europe and Asia and
expansion into new industry verticals, such as energy, finance, insurance and
healthcare. The Company’s Strategic
Investor acted as the Selling Shareholder and achieved a partial exit of $12.5
million in cash at the time of the London Stock Exchange AIM IPO.
Electrical
Geodesics is a medical device company that designs, develops and
commercializes a range of non-invasive neurodiagnostic hardware and software
products used to monitor and interpret brain activity. A key component of these products is the
Company’s proprietary dense array electroencephalography (dEEG) platform
technology. The dense array method
gathers brain activity data from many more electrodes (up to 256) than
conventional EEG products, generating significantly higher-quality and more
precise levels of information. Electrical
Geodesics’ technology has advanced steadily over the last 20 years, with
regulatory clearances from the U.S. FDA, EU MDD/CE and a number of other major
international regulatory bodies.
Barriers-to-entry include reliance on trade secrets and know-how
as well as patents, particularly with respect to the myriad technologies
surrounding electrical brain imaging. The
Company was founded in 1992 to commercialize advanced EEG products invented by
the Company’s Co-Founder, Chairman and CEO in the Brain Electrophysiology
Laboratory at the University of Oregon.
The vast majority of the Company’s 78 employees are based in Eugene,
Oregon. Electrical Geodesics’ technology
has been increasingly adopted as a powerful research tool and, more recently,
as a cost-effective and patient-friendly clinical neurodiagnostic platform.
IBEX
Global Solutions provides voice-based contact center services (i.e. inbound
customer support and retention, technical assistance and sales order entry and
outbound customer acquisition) and other business process outsourcing
solutions; mainly to U.S.-based, Fortune 500 telecommunications and consumer
technology companies. The majority of
the Company’s services are provided ‘onshore’ from eight locations in the U.S.
and the balance is provided ‘offshore’ from three locations in the Philippines
and one in Senegal. IBEX’s competitive
advantage lies primarily in maintaining efficient variable and fixed cost
structures. Variable costs are
controlled by understanding the labor markets in which the Company operates and
targeting optimal wage and benefit levels.
Fixed costs are controlled by locating the majority of the Company’s
support functions in Pakistan (software and technology development and
analytics) and the Philippines (workforce management and quality
assurance). IBEX was founded in 2002
when the Strategic Investor acquired a stake in one of the operating companies
and then acquired and integrated six additional companies over the next decade. The Company has 8,000 employees; 3,850 in the
U.S. at its Washington, D.C. headquarters and across the eight contact centers,
2,100 in the Philippines, 1,600 in Pakistan, 400 in Senegal and 50 in the
U.K. Future growth opportunities are
focused on providing additional voice-based services to existing U.S. clients,
winning new voice-based U.S. clients, diversifying into non-voice services,
such as email support, chat and website
administration, adding industry verticals, such as healthcare and utilities,
and expanding into Canada, the U.K. and France. The Company’s Strategic Investor acted as the
Selling Shareholder and achieved a partial exit of $5.9 million in cash at the
time of the London AIM IPO.
U.S. London AIM-Listed Company Secondary
Offerings
The 58 U.S. companies listed on the London Stock Exchange's AIM account for 5.3% of the
1,085 companies listed on AIM, however, they only account for 3.2% of the
secondary offering funds raised on London's AIM since 2010.
In prior years, the U.S. companies listed on the London Stock Exchange's AIM have accessed larger amounts of capital,
resulting in rapid growth, and are now more advanced in terms of their stage-of-development
relative to the London Stock Exchange's AIM as a whole. As such, many
are now self-sustaining and simply require less growth capital.
Entire Market |
Number of
London AIM
Secondaries*
|
Gross Funds Raised
(in £ millions)
|
Average Funds Raised
(in £ millions)
|
H1 2010
|
307
|
2,185
|
7.12
|
H2 2010
|
384
|
3,553
|
9.25
|
H1 2011
|
320
|
2,451
|
7.66
|
H2 2011
|
204
|
1,165
|
5.71
|
H1 2012
|
284
|
1,505
|
5.30
|
H2 2012
|
248
|
973
|
3.92
|
H1 2013
|
250
|
1,080
|
4.32
|
Total
|
1,997
|
12,912
|
6.47
|
* 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 half-year.
United States |
Number of
London AIM
Secondaries*
|
Gross Funds Raised
(in £ millions)
|
Average Funds Raised
(in £ millions)
|
H1 2010
|
7
|
15
|
2.14
|
H2 2010
|
14
|
109
|
7.79
|
H1 2011
|
12
|
38
|
3.17
|
H2 2011
|
9
|
59
|
6.56
|
H1 2012
|
11
|
33
|
3.00
|
H2 2012
|
13
|
78
|
6.00
|
H1 2013
|
17
|
83
|
4.88
|
Total
|
83
|
415
|
5.00
|
* This is the number of London AIM-listed companies that
completed secondary offerings on London's AIM as opposed to the number of discrete secondary
offerings on London's AIM.
Of the 83 U.S. companies listed on the London Stock Exchange's AIM that completed secondary offerings
on London's AIM since 2010, 50 completed London AIM secondary offerings in more than one half-year,
therefore, 57% of the U.S. companies listed on London's AIM (33 of 58) have completed at least one
London AIM secondary offering since 2010. The
distribution of gross funds raised by these 83 U.S. companies listed on the London Stock Exchange's AIM is illustrated in
the chart below, with 64% (53 of 83) raising between £1 and £10 million.
U.S. London AIM-Listed Company 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 new investor
support. Historically, from 2005 - 2009,
25% 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.
One of the two U.S. company IPOs on London's AIM during the second
half of 2010 included selling shareholders.
In that transaction, the selling shareholders included a PEG, a VC, a
Strategic Investor and several Angel Investors for an aggregate of $30.2
million. None of the U.S. company IPOs
on London's AIM during the second half of 2011 included selling shareholders. Both of the U.S. company IPOs on London's AIM during the
first half of 2012 included substantial cash and other consideration received
by the founders and other shareholders, amounting to $47.4 million and $54.1
million. Two of the four U.S. company
IPOs on London's AIM during the first half of 2013 included the Strategic Investor as
the selling shareholder, receiving $12.5 million and $5.9 million in cash, as
described in detail above.
While London AIM selling shareholders are most common in conjunction
with a London AIM IPO, U.S. company insiders have sold in the aftermarket on London's AIM in organized
transactions on three occasions since 2004; twice as part of London AIM secondary
offerings and once on a standalone basis.
In all three instances, the London AIM-listed companies were performing exceptionally well
with the organized insider selling on London's AIM driven by a need to “satisfy excess demand”
for the company’s shares on London's AIM. There were no
such transactions from 2010 through the first half of 2013; however, insider
selling in the normal course of daily share trading on the London Stock Exchange's AIM is commonplace.
U.S. London AIM-Listed Company 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 - 2009, they have
provided 20% of the funding for U.S. company IPOs on London's AIM and 20% of the
secondary offering funds raised for those companies listed on London's AIM.
From 2010 through the first half of 2013, 19% (16 of 83) of
the U.S. companies listed on the London Stock Exchange's AIM that completed secondary offerings on London's AIM were at least partially
financed by Accredited Investors or QIBs, providing 12% of the total funds
raised.
U.S. London AIM-Listed Company Industry
and Geographic Dispersion
London Stock Exchange AIM-listed companies are organized into 90 sub-sectors,
which feed into 40 sectors, which feed into 10 super sectors. The 58 U.S. companies 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 U.S. oil and gas exploration and production companies listed on the London Stock Exchange's AIM in Texas, which includes three oil and gas field
technology services companies. The other
major concentration of U.S. companies listed on London's AIM is in industrial and consumer technology, including; digital media, biotech and cleantech, between Boston and Washington D.C. and in California.
Within Basic Materials, three of the nine U.S. companies listed on the London Stock Exchange's AIM produce
chemicals/compounds for the health and growth of fish, plants and agriculture, four
U.S. companies listed on London's AIM are mining concerns, one is a forestry investment fund and one U.S. company listed on London's AIM is a clean water
antimicrobial technology company.
Industrials is comprised mainly of a wide range of
U.S. 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 and B2C voice-based contact center services
and other business process outsourcing solutions.
Consumer Services consists of a U.S. digital media company listed on the London Stock Exchange's AIM, an athlete representation agency and a provider of B2C
online customer acquisition solutions listed on London's AIM.
Consumer Goods consists of a U.S. AIM-listed company that develops fuel cells for
vehicles and a U.S. AIM-listed online and mobile, social/casual, interactive games developer
and publisher.
[1] Not
particularly meaningful given the relatively small denominators.
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