By David Stevenson on Monday 14 March 2016
Equity platform goes full circle and offers investor access to retail IPOs
Cambridge based equity crowdfunding platform Syndicate Room has today announced that it has become in effect an old fashioned stockbroker, giving its investors access to new listings (called IPOs or initial public offerings) and private placings. The platform has in effect acquired intermediary status with the London Stock Exchange.
According to SyndicateRoom it is currently the only alternative finance company to provide its members with direct access to public and private equity markets - helping their investor base to diversify their exposure to different asset classes through one platform. The platform says a wide spectrum of equity opportunities will be available to its members, from early-stage crowdfunding rounds through to high-growth IPOs, pre-IPOs and discounted placings encouraging greater investor loyalty. SyndicateRoom members will now be able to participate across the entire funding journey of growth businesses.
Goncalo de Vasconcelos, CEO and Co-Founder of SyndicateRoom, said: “SyndicateRoom has already built a large member base of online crowdfunding investors, helping to create a new equity-owning class – the mass affluent. We are now seeking to democratise access to the public market, widening the reach of IPO discounts and putting the public back into IPO. SyndicateRoom’s move into the public equity market is another step in the evolution of the London Stock Exchange providing capital to growth companies, now with greater participation from individual investors.”
Discounted placings are typically only offered to institutional investors. Over the past two years, over £16.5bn was raised on the London Stock Exchange via placings and IPOs, with an average 10% discount given. According to Syndicate Room that means £1.65billion of value has been given to the traditional City of London investment community. SyndicateRoom says it wants to spread this benefit to a far wider range of investors and believes there is strong appetite for investment among individuals considered too small to be embraced by the advisor community. It reckons that there are 12 million individuals in the UK population holding individual company shares but over three quarter of those did not buy into public equity in the last year. SyndicatRoom's new stockbroking platform is an attempt to bridge this divide.
This innovative new investment platform – in effect an incremental distribution platform that rivals the much bigger savings platforms such as Hargreaves Lansdown and AJ Bell – is being launched via pubic retail access to a new listed outfit called the HealthCare Royalty Trust Plc. The IPO for this income orientated outfit is looking to raise £200m from the public markets.
On first inspection this looks like an innovative new offering from SyndicateRoom. In effect its looking to bridge the divide between old finance – traditional stockbrokers – and new, alternative finance – crowdfunders. Traditionally investors would have to sign up to a stockbroking platform in order to access IPOs and private placings. For many investors this all time consuming and not a little daunting. By offering access to IPOs SyndicateRoom is in effect turning into an alternative stockbroker, with products both in the public (IPO listings) and private equity space – all held via one account, online. Crucially the IPO route echo’s many of SyndicateRoom's existing ideas – IPOs involve private investors coinvesting alongside institutional money and the first IPO is in SyndicateRoom’s sweet spot of healthcare.
The devil of course will be in the detail. Many IPOs prove popular because the investors want to sell out almost immediately afterwards. The platform says it will offer a cheap dealing service that will allow investors to sell their shares. The success of this new offer will also depend on how many brokers issuance programmes it can access and on the ability of SyndicateRoom to offer tax wrapper structures in later iterations of the product. It’s also worth observing that SR is in effect putting itself head to head against the likes of Hargreaves Lansdown, who focus mostly on funds.
Another interesting feature of this announcement is that both Crowdcube and SyndicateRoom have now in effect admitted that access to public markets is a key feature of the development of the private equity crowdfunding space. Crowdcube has already received backing from traditional stockbroker Numis and has long said that it wants to build a next generation private venture market which would echo much of what AIM was set up to do. Syndicate Room has by contrast chosen to go direct, set itself up in effect as a stockbroker and go for private investors.