Paul Tyrrell
If your company is growing faster than you can finance, a stock market listing might provide the capital you need. And if you are part of a hi-tech industry, one stock market springs instantly to mind: Nasdaq – the US wholly computerised composite index of mostly hi-tech stocks.
So far, United Kingdom listings on this index have been mainly confined to blue- chips, but now a Chicago lawyer hopes to persuade small and medium-sized enterprises (SMEs) that they can also cash in.
“We’re interested in helping more development-stage companies,” says Steve Curtis, who will be touring the United Kingdom early next year in a bid to persuade SMEs to list on Nasdaq via his firm, D’Ancona & Pflaum. “The appetite of US investment banks and venture funds seems to be increasing for these investments.”
He said listing on Nasdaq from abroad is probably suited to medium-sized companies worth 50-million to 250-million, but that opportunities do exist for UK start-ups to raise seed capital through the exchange.
Curtis will be making presentations, along with the Association of Corporate Treasurers, investment banks and UK law firms, in London and Bristol.
He says companies frustrated by the lack of available capital in their domestic markets could benefit from Nasdaq’s tendency to value companies higher than other markets, as well as from the size and stability of the US market.
He adds investors on the US market “tend to be more adventurous”.
Some corporate financiers in the UK see things differently, however. “In the UK, we tend to look at past results. In the US, they look at prospects; they just cross their fingers and hope,” says Peter Rickett of Austin Securities, which has sponsored listings for SMEs on a variety of markets.
He says managers should be aware of the demands of satisfying US investors, and of the reporting required there. He advises companies that do not operate commercially in the US to “stay in the UK”.
David Cohen, head of corporate broking at the UK division of SG Securities, also urges caution. “There’s a danger that a UK company that swans over to the US could be left stranded, under-researched,” he says.
He says that in order to generate interest in its shares, a company must promote itself to research analysts and journalists who will influence local investors.
For example, hi-tech companies in the Thames Valley can rely on exposure due to their proximity to London.
This was among the factors that led Cohen to advise one hi-tech client, Easyscreen, to list on the London Stock Exchange as part of Techmark, the new index for hi-tech stocks.
When it launches on November 4, Techmark will include listed companies involved in computer hardware, computer services, the Internet, semiconductors, software and telecoms, plus other ancillary industries.
It will also take advantage of new London Stock Exchange regulations removing the need for companies to provide a three-year trading history to get a full listing.
Companies can now list by achieving a certain size (50-million market capitalisation) and by selling a minimum volume of new or existing shares on flotation (20-million).
They must also provide quarterly financial reports.
Cohen believes many firms may find Techmark more appropriate than Nasdaq. “Quality sponsors believe the UK is as good as Nasdaq, and [for UK firms] having it in the same time zone makes it just as valid a launch pad,” he says.
“Europe is not lagging too far behind Nasdaq, except in terms of ad-spend.” Moreover, hi-tech companies will appear not only on Techmark, but also on the main FTSE index.
No one disputes that higher valuations are likely on Nasdaq. But companies should consider where they most need a listing to raise their profile. After all, if Techmark takes off, your company could become the next Microsoft without leaving the UK.