UKBAA Blog: SyndicateRoom – putting the public back into IPO

Tom Hinton, Head of Capital Markets, SyndicateRoom

We live in a world where ordinary investors can invest in early-stage companies at the click of a mouse. This is what SyndicateRoom facilitates day in day out, and it’s enabled our members to fund more than 70 UK companies in the past three years. But these very same investors continue to be effectively locked out of IPOs and public market placings. Discounted opportunities remain the preserve of big institutional investors.

We had a hunch that there is significant untapped retail demand to invest in IPOs and placings, and this was validated when we surveyed3,000 UK consumers on their personal finance habits. We discovered that an astounding 70% of respondents could be motivated to invest in equities and that over 60% felt that managing their own investments is appealing but difficult. Of the respondents that knew what IPOs were, almost 40% said they would have invested in an IPO had they been given the chance.

What’s particularly positive is that over 73% believe that crowdfunding has helped democratise the way people can invest in startups. We’re on a mission to broaden this democratisation to the public markets. Essentially, investors want to invest, but a significant number do not know how to go about it.

We believe that retail investors should be given access to IPOs and placings, and we also believe that it makes sense for companies to have access to the broadest pool of demand.

So, in March this year we made history by becoming the first crowdfunding platform to named a member of the London Stock Exchange, giving us the ability to bring retail investors into deals on AIM and the LSE main market.

The move was very well received by the industry, which saw the huge potential in the virtually untapped retail market.

It’s never easy being the first to step onto uncharted shores since it falls to you to map out the new area, get the lay of the land. So we’ve been speaking with brokers, companies, advisors and investors in relation to what we are doing and how we can work together in this new dynamic. We’re making an existing process much slicker, by harnessing the power of technology.

We have been busy getting deals, from placings on AIM for Fitbug (wearable tech for the corporate world) and Scancell (AIM-listed pioneer in immuno-oncology), to 3i Infrastructure’s £385m share placing in May – a ground-breaking move for the crowdfunding industry that proved our platform is equipped, ready and able to participate in a big equity funding round by a main-market-listed entity.

And, perhaps most importantly, retail investors are now being placed in the same position as the professionals by being able to participate in IPOs and placings at the same discount. Over the past two years, more than £16.5bn was raised on the London Stock Exchange via placings and IPOs, with an average 10% discount given. That means £1.65bn of value was given to the traditional City of London investment community.

We’re now spreading this benefit to a far wider range of investors and know that there’s a strong appetite for investment among individuals considered too small to be embraced by the advisor community. In fact, 12 million individuals in the UK population are estimated to hold individual company shares, but over three-quarters of these did not buy into public equity in the last year.

We’ll continue to present our members with exciting opportunities, and we’ll do our best to fight the good fight so that retail investors get a fair deal – and companies get access to more capital.