The ELITE programme launched recently by the London Stock Exchange is intended to help fast-growing companies reach the point where a public listing could be a viable next step for growth. But will it make a difference in Scotland, which in recent years had a tentative relationship with the public markets?
Previously, Scotland's business community has shown little enthusiasm for public stock exchange listings, despite the potential for IPOs to help take companies to the next stage of growth. If anything there has, in fact, been a reduction in the number of Scottish listed companies, with many of the established businesses being taken over.
That's been compounded across the UK by the recession, which didn't provide investors or would-be-plcs with the confidence needed to go for public trading.
Now that we're enjoying what appears to be a genuine recovery, the London Stock Exchange has responded with the ELITE programme – a group of 17 companies selected for their rapid growth to date and the potential to continue that growth all the way to IPO and beyond. Among them are three Scottish tech firms: M Squared Lasers, Taragenyx and Money Dashboard.
Here's what the LSE says about the new initiative (there's also a good video here):
ELITE is a unique platform designed to help the UK's most exciting and ambitious private companies prepare and structure for their next stage of growth. It facilitates structured engagement between the UK's most exciting private growth companies, entrepreneurs and business leaders as well as the corporate advisory and investor community.
The three-step programme prescribed by ELITE is a well-tested springboard to successful IPO, and one we've used previously with clients we've helped take to the public markets.
The three stages are Get Ready, Get Fit, Get Value; in a nutshell, a structure which allows you to get your business in the best possible shape to success as a listed company.
So will it work? In lots of ways, it's a good time to launch a programme like this. As I said, we're accelerating out of a recession and seeing some real growth in the economy; confidence seems to be up with debt and equity markets improving.
But the IPO market in recent months has been characterised by some companies being taken to market at prices which many commentators have viewed as slightly over-rich. What has tended to result is a subsequent fall in values as investors reassess the growth prospects of the business.
However, there are signs that IPO valuations are cooling off slightly and I'd hope we'll see steadier performances from new market entrants over the next few months.
That's good news for Scottish companies. We have no shortage of talented, hungry and growing businesses who could be in the next cohort of ELITE participants, which will be announced in around six months.
The challenge for the programme is to demonstrate it can work. It's already had a successful run in Borsa Italiana, the LSE Group's Italian index, so there doesn't appear to be any reason why it couldn't work in the UK.
The LSE will be banking on the economic recovery and the introduction ELITE offers to the world of public markets to encourage more businesses from outside of London to consider an IPO to drive their next stage of growth.
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