It took a crisis to remember the value of public markets.
Pre-Covid the trend was apparent.
Companies were staying private for longer.
There was an unlimited pot of money to draw from and eye-watering valuations were creating instant paper millionaires.
The government has intervened in an unprecedented way and it is not nearly enough. Investment rounds were going into the E, F and Gs. The only real concern was a fear that we were running out of letters in the alphabet.
Even retail investors were getting in on the action. Everyone wanted to be part of the “private revolution”.
Savings were going into funding the next big start up instead of boring listed equities, funds or ETFs.
Public markets were being brushed aside for this new, sexier alternative.
This took all but three months to reverse.
The crisis
Private companies are now in dire straits. Funding has dried up. LPs are reneging on their commitments.
The government has intervened in an unprecedented way and it is not nearly enough.
The fluidity of the UK’s public markets has been astounding. A taskforce called The Recapitalisation Group was recently set up to clean up this mess.
Quietly in the background public markets are thriving. In this world the opposite is true: companies are raising money at will and investors are fighting for their share of the allocation.
The message from private and public investors highlights this stark contrast. The former expects companies to cut costs and soldier on in the hope for a V-shaped recovery. The latter is actively supporting companies to raise early and in large size.
The proof is in the pudding. In the last few weeks, UK listed companies have raised over £7 billion of equity and £100 billion in debt capital across over 100 financings.
The fluidity of the UK’s public markets has been astounding.
The ecosystem coordinated swiftly to adjust rules such as pre-emption guidance to speed up the funding process.
Incredibly, the only real government intervention needed here is to make sure all investors can get their fair share!
At PrimaryBid, we represent retail investors. An open letter we wrote calling for the protection of their participation rights in fundraisings received extraordinary support.
The public markets are undergoing a retail renaissance. It was signed by major business leaders and thousands more from the general public who are passionate about backing UK plc.
The response was immediate. Compass Group recently became the first Ftse 100 company to include a retail offer alongside its accelerated £2bn placing.
It is clear that UK PLCs from AIM to Ftse 100 care about retail investors. They now have the tools to enfranchise them.
Indeed, the public markets are undergoing a retail renaissance.
UK’s online platforms are reporting a huge surge in activity from both existing clients and new account openings.
So far this year, up to 20 per cent of the volumes on the Ftse All Share came from retail investors with 60-80 per cent of this volume being BUY orders.
Platforms are also reporting three-four times increases in new account openings, the majority coming from a younger sub-40-year-old demographic.
This is a global phenomenon.
Growth
In France, the French regulator AMF released numbers on retail participation.
Volumes were four times higher than pre-Covid levels with 27 per cent of this participation coming from a new, younger investor base.
In the US the major brokerages reported a staggering 72 per cent-144 per cent increase in their daily average revenue trades for the first quarter of 2020.
Re-equitising public markets could be the answer to the recapitalisation dilemma faced by private companies. With activity in the primary and retail capital markets booming, it is surprising that these two vital ecosystems remain decoupled.
PrimaryBid, in partnership with London Stock Exchange and Euronext, is building the technology gateways to connect these infrastructures across the UK and Continental Europe.
It is heartening to see that in these extreme conditions the public markets have remained open. It has been a bedrock of stability and resilience, mobilising rapidly and delivering capital at a remarkable scale.
A powerful demonstration that access to ongoing capital is made easier when a company is visible, understandable and known to a wide base of investors – which all come with a public listing.
Re-equitising public markets could be the answer to the recapitalisation dilemma faced by private companies.
With over 400 years of experience, public markets have seen many difficult times – world wars, nuclear fallouts, global pandemics – and come out shining.
This one is surely no different.
Anand Sambasivan is chief executive of PrimaryBid
