The Times of 30th July contained an article headed 'It is not just the investors that are feeling the pinch - brokers are, too'. It quoted Alex Snow, the CEO of Evolution Group, as declaring the financial markets to be 'worse than awful' and set to remain so. The article also made the point that 'business across the City has dwindled in the financial crisis and the recession it prompted. The market for new issues is dessicated, secondary trading moribund'.
To a large extent these are self-inflicted wounds caused by:
- high overhead structures.
- having to make decisions on which projects to work on with a keen eye towards those generating sizable fees to fund the overheads rather than on those most likely to deliver an attractive return to investors.
- delivering to investors many companies which have achieved uninspiring returns.
- overlooking the fact that larger companies capable of paying sizable fees once had to go through the phase of being small companies.
Examples of companies which have grown into significant businesses and continue to have attractive futures are Albemarle & Bond (the pawnbroker which listed on AIM in 1995 as a microcap and now has a market cap of £208 million) and Immunodiagnostics (the healthcare diagnostics company which listed on AIM in December 2004 with a market cap of £6.7 million and now has a market cap of £340 million) - the latter had a very challenging time raising £1.6 million of new money at IPO.
What I want as an investor is to have access to companies such as the above where there is a good chance of being able to generate an attractive return by holding the investment for the long term and also to benefit from a rerating as the company reaches a size where it starts to get recognised by a wider universe of institutional investors. In order to enable this to happen, corporate finance houses are needed which have a combination of overhead structure and business model which make it economic to service fundraisings by carefully selected microcaps. One such firm is this site's owner, Lesmoir-Gordon, Boyle & Co, and details of their fundraisings will be accessible to investors registering on www.sophisticated-investor.co.uk.
