ITY traders are launching a market that will make it easier for big investors to buy shares in unlisted companies, potentially ending decades of frustration and aiding calls from the government for pension funds to give more support to “fast growth” firms.
With investors increasingly vexed with the stock market – share values are low which makes it hard to attract new London floats – JP Jenkins is linking with Square Mile stalwarts Winterflood Securities to match buyers and sellers in UK growth businesses.
JP Jenkins CEO Mike McCudden says: “There’s a problem. Unlike the US, growth companies in the UK are unable to tap into the capital they need and mature companies find themselves with limited vexit routes. It’s clear there’s demand – from policymakers, politicians and the City – for more options to help these growth businesses flourish, but the longer it takes, the more wealth creation we see leaving the country.”
JP Jenkins is using tech from parent company InfinitX to link its systems with Winterfloods.
That means buyers can trade these securities from their current trading platforms, providing a huge improvement in accessibility.
It already boasts almost 50 unlisted stocks and could have 100 by early 2024. They include Prax Exploration, Thrive Renewables, yacht maker GYG – and Stanley Gibbons, the stamp auctioneer.
While those investments are riskier than FTSE 100 shares, institutional buyers are demanding greater access to the asset class – which could include the unicorns of tomorrow, says JP Jenkins.
Data from the ONS notes that in 2022 alone, UK companies worth a total of £57 billion – along with their future profits and resulting dividend payouts – were acquired by overseas investors.
Globally, demand for unlisted assets continues to soar. Numbers from EY puts the value of private capital markets worldwide at more than $22 trillion.
Alex Skrine, Director at Winterflood Securities said: “For too long it has been too complicated for many intermediaries and their underlying investors to gain access to unlisted UK equities. As more and more companies are choosing to remain private for longer, reform here is long overdue.”
JP Jenkins points out that only 1% of corporate Britain is listed on the stock market in the first place. Given the expense of maintaining that listing and the negative view markets presently have of London shares, the number of public companies is likely to keep falling.
City investment legend Richard Buxton last week told the FT he thinks the UK equity market in a “very sorry state”.
This week the Boardroom Bellwether survey found that four-fifths of FTSE 350 companies complain that increased corporate reporting requirements are a distraction from running the business.
This week Pelatro said it would delist from AIM, noting, “the considerable cost, management time and the legal and regulatory burden associated with maintaining the Company’s admission to trading on AIM”.
Both Chancellor Jeremy Hunt and his shadow Rachel Reeves have been calling for more pension fund investment in unlisted start-ups. Reeves even suggested she might force them to do so by law.
Critics have said this exposes the funds to higher risks than retirement funds should be taking, however.
McCudden said: “Our collaboration with WINS and InfinitX should be seen as an important step in changing the direction of travel.”