Last week two public companies announced their intention to quit the London Stock Exchange’s AIM.
First it was drug discovery company C4X Discovery Holdings, followed 24 hours later by Byotrol, a specialist infection prevention and control company.
Today (April 2nd) RedX, the Alderley Park-based clinical-stage biotech company for the treatment of cancer, announced its intention to follow suit and delist.
Coincidence or part of a deeper trend?
Research by UK trading platform XTB found total listings dropped 6 per cent to 1,836 last year. According to XTB the peak for listings came in 2013 and there’s now growing concern that London is losing its status as a global financial hub.
Of course, criticism of London’s public market is nothing new – just ask THG founder Matt Moulding.
He has regularly criticised the behaviour of hedge funds, media and bank analysts, who he says have created negative coverage against listed companies, including his own Manchester-headquartered eCommerce giant.
Last year he used the sale of Hotel Chocolat to US confectionery giant Mars £534m – and subsequent delisting from the London Stock Exchange – to point out that the amount of capital raised on IPOs in London is now lower than Turkey and Romania.
Moulding said the LSE was no longer the place where ambitious companies go to raise investment and questioned the LSE’s governance processes.
Of course, the cases of giants like THG and Hotel Chocolat are very different to smaller companies like RedX, C4X Discovery and Byotrol.
In a statement issued to the LSE this morning, Dr Jane Griffiths, chair of the board of director at RedX Pharma, said: “We believe our current market valuation is not reflective of our track record or future potential and is not conducive to raising the level of capital required for our growing clinical portfolio.
“The board believes that as a private company we can access a broader universe of specialty investors and, accordingly, a larger quantum of future funding required to execute our strategy and maximise our value.”
According to a statement by Byotrol, the directors unanimously concluded that being listed is no longer in the ‘best interests of the company’ and that ‘we should now seek cancellation of the company’s ordinary shares on AIM’.
The main reason given for the delisting was that it’s no longer ‘financially viable’ for Byotrol to trade as an AIM quoted business.
“A continued AIM quotation has become unnecessarily costly and regulatorily burdensome for our current stage of development,” said the statement.
“The directors do not believe the current market valuation reflects the underlying strength of the company’s product business, its IP portfolio or the current market opportunity.
“The board believes that an unlisted company can take and implement decisions more quickly than a a company that is publicly traded.”
Put simply, Byotrol say that being listed is hampering their growth.
Byotrol’s statement is remarkably similar to the reasons given by C4X Discovery Holdings.
CEO Dr Clive Dix said: “We have not taken this decision lightly, however, following an extensive review and deliberation to ascertain the most effective way to maximise shareholder value in the longer term and increase the potential for the long-term success of the company, the board has unanimously concluded that it is in the best interests of the company and our Shareholders to delist from AIM and re-register as a private limited company.
“Despite delivering on our strategy including three major deals with leading pharmaceutical companies demonstrating our scientific expertise and deal making capabilities, the recent downturn in the financial markets has adversely impacted our share price, and with it, our future ability to raise funds in the public markets.
“The board believes the current public market valuation does not reflect the underlying potential of our business or our achievements to date and that this is unlikely to change in the short-to-medium term.
“We believe that we can potentially access a larger quantum of future funding required to accelerate our strategy as a private company and therefore we believe that a cancellation of the company’s admission on AIM is in the best interest for shareholders and for the future of our business as a whole.”
One experienced dealmaker I spoke to said the decision by RedX, C4X Discovery and Byotrol was probably driven by the same thing – the desire to raise funding.
He said most companies delist because they’ve been bought – like Hotel Chocolat – but being listed can restrict your ability to raise money.
He also made the valid point that one reason for the drop in listed companies is the fact that not many companies are choosing to go public.
There’s also a perception that the stock market is not really open for funding and that there’s little appetite for institutions to invest in smaller companies.
The dealmaker added: “The stock exchange in London has a lot of competition, especially with the growing number of tech firms looking at other markets like the Nasdaq.”
All in all, what is does mean is that RedX, C4X Discovery and Byotrol are unlikely to be the last public companies looking to delist.