Lighthouse de-listing prompts fear over IFA capital raising
Research firm says few IFAs are even close to achieving 15 per cent return on equity required to successfully list.
The Lighthouse Group, the last IFA company on the Alternative Investment Market, has announced plans to de-list, prompting fears about the future of advisory firms looking to raise capital publicly.
Comments made by David Hickey, chairman of and a shareholder in the Lighthouse Group, suggest there is a perfect storm building against IFAs and their ability to list and raise funding for future growth.
He suggested the FSA’s retail distribution review, the economic climate and general negative investor attitudes towards financial services have all combined to work against IFA firms’ ability to obtain funding.
Mr Hickey said it was no longer “advantageous” to be listed.
He added it was hard to provide forecasts for investors because of the ongoing regulatory changes, saying: “It has been clear for some years the Aim market is not doing anything for the group.”
Mr Hickey said: “As time has passed it has become obvious there is less likelihood for a revival of investor sentiment that would make IFAs more attractive.”
He said Lighthouse’s decision had come because “smaller companies and financial services are out of favour at the moment”.
He denied there were any parallels with Honister Capital Limited, which has gone into administration and declined to comment on the group’s professional indemnity insurance position.
Shareholder Paul Mumford, senior investment manager at Cavendish Asset Management, has a 5 per cent holding in Lighthouse Group shares in his £17m Aim fund and said the manner of the de-listing has created uncertainty over the future of the group.
He said: “Lighthouse management thinks there might not be much of a future for the company once the RDR reforms come into effect. The de-listing is shoddy to say the least, and will disproportionately hurt the majority of shareholders.”
Mr Hickey denied there were plans to sell the business but insisted if there were it would have to be disclosed and said ultimately it would be to the benefit of all the shareholders, not just the company directors.
The overall share price plummeted from 5.75p before the announcement to 2p at the time of going to press.
The firm was the only financial advisory firm left on Aim, which was once populated by the Millfield Group, Berry Birch and Noble, Inter-Alliance and Cavanagh.
Of all the firms operating in the advisory space only three are listed: AFH Financial on Plus, IFG Group and Hargeaves Lansdown, which was admitted into the FTSE 100 in March 2011 and whose share price stands at 622.5p as at time of going to press.
Other firms that have declared an intention to list at some point include Sanlam, Charles Derby and Towry.
Chris Fautley, chairman of Charles Derby, said: “We definitely want to look at listing but our objective is to get to 400 advisers before we even explore the implications. The move to adviser fees and transparency would make firms more attractive as an investment and therefore may facilitate a flotation.”