Jonathan Morris is a partner at the international law firm Berwin Leighton Paisner LLP. He handles a broad range of corporate finance work and has been involved in a number of significant mergers and acquisitions, IPOs and joint ventures on behalf of UK and international companies.
The announcement by TechFinancials that they are planning to list their shares for trading on AIM in the near future sends a very positive message to other binary option and forex companies considering IPOs in London.
Obviously, we will need to wait and see exactly how much money TechFinancials is raising but the announcement comes on the back of the successful AIM flotation last year by Plus500 (Plus:LSE).
It is understood that several other companies in the same or similar sectors are also considering following in their footsteps.
This is not surprising given London’s recognised status as a global financial centre and the fact that the two principal stock exchanges in London, the Official List and AIM, have worked very diligently at being seen as natural platforms for international companies wishing to go public.
Looking beyond the expected IPO, as with all new entrants to the public markets, one of the key focuses for TechFinancials will be ensuring that they meet market expectations.
This is critical, as any failure to do so, particularly in the first six-to-twelve months after the IPO takes place, is likely to receive a very negative reaction from investors and take a significant amount of time and effort to rectify.
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Another key focus will be compliance with the company’s obligations under the AIM Rules for Companies.
One of the primary ones is the requirement to make an announcement to the market without delay of any new developments which are not public knowledge and which, if made public, would be likely to lead to a significant movement in the price of the company’s shares. Accordingly, any temptation to sit on unpublished price-sensitive information will need to be strongly resisted.
There are other key rules covering such matters as dealings by directors, related party transactions and close periods.
A particular challenge sometimes associated with listings on AIM is how to maintain share liquidity. To do so, the company needs to engage regularly with its new shareholders and this necessitates putting in place a dedicated investor relations programme.
Whilst establishing an internal function to support this will, of course, be helpful, a newly listed company would also be well-advised to engage an effective financial public relations agency (ideally, the same entity that advised on the IPO itself, given its familiarity with the company).
Maintaining a strong relationship with the company’s nominated adviser and broker is also crucial. The company is obliged to have a nominated adviser (as well as a broker) at all times and to consult with them on specific matters, as well as to provide them with certain specified information.
However, in an ideal world, they should be seen as a trusted adviser, alongside the company’s lawyers, accountants and financial public relations company.
On the flip side, if the nominated adviser were to resign, apart from the need to replace them quickly to avoid having the company’s shares being suspended (and ultimately cancelled), such an announcement could raise concerns about the company unless a clear and adequate explanation is offered as to the reason behind it.
The independent non-executive directors can also play an invaluable role in guiding the executive management team through the early days of the company’s life as a listed public company, often acting as a bridge with both the nominated adviser and the new investors.
Listing one’s shares on a public market, such as AIM or the Official List, should be seen as the beginning, not the end, of a process.
To conclude, in order to navigate carefully through the inevitable challenges and opportunities which will arise in the days that follow an IPO, issuers should ensure that they are equipped with the right team to support them.