In 1929, Joseph Kennedy, head of the US political clan, said that when his shoeshine boy started tipping new stocks, he knew a crash was coming. In 2000, this columnist — writing in a somewhat lesser publication — worried that a woman from the post room had become the publication’s best source of news on lastminute.com shares. Today, similar concerns might arise if the few Twitter users who aren’t tech bloggers began retweeting the initial public offering of a £1bn UK tech “unicorn”.
But you can relax. Because nowhere — from the shoeshine chair in Tower 42, to the FT post room, to Lombard’s Twitter feed — is anyone having the following conversation:
“Heard about the Alfa Financial Software IPO?”
“No! Sounds huge! What do they do?”
“You mean you don’t know!? They offer a suite of integrated modules that can be deployed and configured as a full end-to-end solution covering the entire asset finance life cycle!”
“Wow! So, fill yer boots time, right?”
“Well, who wouldn’t want a piece of a tech group with an £800m valuation, a 25 per cent free float, and majority shareholding founder?”
This, genuinely, is pretty much the pitch for Britain’s biggest tech IPO in two years: a founder-controlled company worth less than a billion doing something it cannot describe. And while it certainly succeeds in suppressing the irrational exuberance, it also speaks volumes for UK tech funding — and the brokers that try to provide it.
In the case of Alfa, the description may be a little unfair. It is 26 years old, provides market leading software for leasing companies — including Bank of America and Mercedes-Benz — and has been growing revenues at 20 per cent.
In the case of its co-sponsor Numis, however, the description would appear to sum up a problem: mid-cap IPOs have become scarce and decidedly unexciting. In its half-year results, it reported a 38 per cent fall in half-year pre-tax profit, to £10.5m, mainly because of a “scarcity of primary equity issuance in the UK market”. It had worked on 10 IPOs a year earlier, but this time was only hired for two.
Fortunately, for Numis shareholders, another more flattering comparative provides a bigger and better picture of UK tech fundraisings. In the most recent half year, Numis also raised £150m through a private placement for Accelerated Digital Ventures, a new funding platform for tech start-ups backed by Legal & General and investor Neil Woodford. A year earlier, its biggest private placement was £128m for Skyscanner — the flight comparison site bought by Chinese group Ctrip for £1.4bn. More recently, Numis became financial adviser to Oxford Sciences Innovation, the university’s private spinout incubator.
It has been quicker than most to realise what US venture capitalists have known for years: earlier stage, higher growth tech groups don’t need shoeshiners, posties or Twitterati talking about them. Why IPO when you can raise money ASAP on the QT?
Premier’s flaky recipe
Is there anything that has not yet been enhanced by a Cadbury’s Flake?
Ice cream cones certainly have been. So, too — bizarrely — cups of hot chocolate. Even hot baths, if unbelievable old adverts can be believed. But while these serving suggestions have been long observed (‘99’ ice creams date from 1930, that advert from 1992, via 1972), it seems we have all been missing a trick.
Britain’s Premier Foods has just announced the renewal of a strategic global partnership with Flake maker Mondelez that “will provide for the possibility, subject to approval, to use the full range of Cadbury brands such as Flake . . . opening the door to further growth opportunities in cake.”
Yes, not content with producing a million Cadbury Mini Rolls every day — as well as a “Celebration Cake” that looks suspiciously like a cake with a load of Flakes on top of it — the UK group is now pinning its hopes on putting Flakes on even more cakes.
Its new licensing deal certainly provides scope: it can now add Flakes in 46 countries, rather than 10 at present, and for five years, instead of three, with an option to extend to 2025.
For a company that already derives 8 per cent of sales from Cadbury products, and had been achieving 19 per cent growth on branded cakes, news of the renewal also removes an uncertainty. As one analyst put it: “This deals with what has been something of an overhang on the shares.” Why, then, did the share price chart more closely resemble a cake of the pan variety?
Might it be the unappetising flavour combination served up by the current management? Having rejected a bid from US spice maker McCormick at 65p a share, Premier has taken investment from Nissin that gives the Japanese noodle group a 20 per cent stake, while welcoming a Hong Kong activist hedge fund to its board with only an 8 per cent holding. Spiceless noodles with a poison pill stirred up in a murky Chinese sauce? Little wonder no one is buying at 43p. Next week’s results may need to add a lot more than crumbly chocolate to the mix.
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