Dodgy IPOs - name and shame the brokers

Friday, Jun 22 2018 by

A long time ago I used a discretionary wealth manager, Brooks MacDonald Brooks Macdonald (LON:BRK). Despite giving them a cautious mandate, they put a load of my assets into the IPOs of Squarestone, an AIM listed Brazilian property developer than soon delisted, and Ncondezi Ncondezi Energy (LON:NCCL). Ncondezi Energy (LON:NCCL) promptly lost over 90% of its value, I fired Brooks Macdonald (LON:BRK) and started managing my investments myself. I suspect, by the way, that Brooks Macdonald (LON:BRK) received fees for putting private clients into the IPO, but am trying to get to the bottom of this.

However, this week's collapse of Footasylum (LON:FOOT) so soon after its IPO made me wonder who was the broker behind it, and I understand the answer is Liberum. Who, funnily enough, were behind both Squarestone and Ncondezi Energy (LON:NCCL). And it struck me that it would be helpful for investors to have a list of IPOs that have gone badly and the brokers who brought them to market.

It is not to say that every company floated by X or Y will be a scam, but if there is a pattern then it gives us another risk factor to be aware of before investing and may, if enough people pay attention, cause brokers to raise their game if they believe their reputation is being damaged by puffing up new issues.

So please use this thread as a resource and post any examples of IPOs that have disappointed and the brokers behind them

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Footasylum plc is a United Kingdom-based lifestyle fashion retail company. The Company is focused on bringing to market footwear and apparel collections predominantly aimed at 16 to 24 year old fashion-conscious customers. The Company provides a broad range of footwear, apparel and accessories for men, women and children. The Company’s own brands include Kings Will Dream, Glorious Gangsta, Alessandro, and ZAVETTI. The Company operates a multi-channel model which combines a 61-strong store estate in a variety of high street, mall and retail park locations in cities and towns throughout Great Britain e-commerce platform and launched wholesale arm (for distributing its own brand ranges via a network of partners). more »

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Ncondezi Energy Limited (Ncondezi) is a power development company with an integrated thermal coal mine and power plant project located near Tete in northern Mozambique (the Ncondezi Coal Mine and Power Project, respectively). The Company operates through three segments: Mine project, which is involved in the exploration for coal and development of coal mine within the Company's license areas in Mozambique; Power project, which relates to the development of approximately 300 megawatts (MW) integrated power plant next to the Company's coal mine concession areas in Mozambique, and Corporate. Ncondezi is focusing on developing the projects in phases, subject to additional financing, with the first phase targeting approximately 300 MW and ultimately scalable to over 1,800 MW. Its subsidiaries include Zambezi Energy Corporation Holdings 1 Limited, Zambezi Energy Corporation Holdings 2 Limited, Ncondezi Coal Company Mozambique Limitada and Ncondezi Services (UK) Limited. more »

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Brooks Macdonald Group plc is a United Kingdom-based company, which offers a range of investment management services and related professional advice to private high net worth individuals, charities and trusts. The Company also provides financial planning, as well as offshore fund management and administration services and acts as fund manager to regulated open-ended investment companies (OEICs), providing specialist funds in the property and structured return sectors and managing property assets on behalf of these funds and other clients. The Company operates in four business segments: investment management; financial planning; funds and property management, and international. The Company's other activity, offering nominee and custody services to clients, is included within investment management. The Company's operations are located in the United Kingdom and the Channel Islands. more »

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  Is LON:FOOT fundamentally strong or weak? Find out More »

8 Posts on this Thread show/hide all

timarr 22nd Jun '18 1 of 8

It's a good idea, but you need to be careful to make sure your data is correct. Brokers don't carry responsibility for AIM IPOs, that's the role of the Nomad.

In the case of Footasylum (LON:FOOT) IPO, Liberium were the Broker. The Nomad, was GCA Altium. The prospectus is here:

The difference between the Nomad and Broker roles at IPO is set out on the LSE website:


In essence the Nomad is responsible for due diligence on the company to ensure it's suitable for listing, the Broker is responsible for price setting and whipping up investor interest.

Sometimes the Nomad and Broker are one and the same - this was true for another IPO gone badly wrong, Accrol Group (LON:ACRL) where the advisor was Zeus Capital:


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Gromley 22nd Jun '18 2 of 8

There's a useful link to all IPOs in London here

It would require a bit more work though to identify who actually brought each of them to market. The list does include the NOMAD for AIM issues, but this is not always the same as the broker. For Footasylum (LON:FOOT) Altium were the NOMAD, but as you say Liberum were the broker.

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gus 1065 22nd Jun '18 3 of 8

Good idea to have a central thread on this theme while accepting the caveat on the need to identify true accountability. Several advisers on my personal “best avoided” list. Allenby Capital, Nomad for those bastions of good corporate governance the much loved InterQuest (LON:ITQ), are my current bete noir as per details on the attached link.


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Logic 22nd Jun '18 4 of 8

I'd be extremely cautious with IPOs in general, because I have a deep mistrust of investment bankers involved and those issuing research notes. But it would still be interesting to know whether some companies float a greater amount of companies at unreasonably high (or low) prices.

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mmarkkj777 22nd Jun '18 5 of 8

A great idea. It is only something like this that would again get me vaguely interested in IPOs.

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timarr 22nd Jun '18 6 of 8

In reply to post #377334

That was my view for a long time too, but since I started delving back in the results have generally been pretty good. Accrol Group (LON:ACRL) was the main mistake, and the error was all mine, I simply didn't do my due diligence properly.

On the other hand there's been Watkin Jones (LON:WJG) (+93%), Ramsdens Holdings (LON:RFX) (+55%), Strix (LON:KETL) (+20%), GYG (LON:GYG) (+17%) in order of purchase. I also hold Harwood Wealth Management (LON:HW.) and SimplyBiz (LON:SBIZ) and bought into FFI Holdings (LON:FFI) after the post-IPO fall - which in that case wasn't the Nomad's fault, as I don't think Harvey Weinstein being brought to book was a forseeable risk :)

Broadly you want a business with a long track record of good results, an engaged management who aren't simply cashing out and a decent Nomad. None of that guarantees success, but it helps.


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donald pond 22nd Jun '18 7 of 8

Perhaps one aspect of FOOT that should have set alarm bells ringing was that Liberum were not also the Nomad, whereas there are 27 companies they do act as Nomad for. It is speculation, but it may be that they didn't fancy the responsibility that came with being a Nomad, but were quite happy to take the 1-2% fees for finding investors.

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xcity 22nd Jun '18 8 of 8

Broker and NOMAD aren't the same, but I would expect a broker concerned for their clients and reputation to have done due diligence.

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