Flotations are for raising profile as well as cash

Peter Ranscombe
Peter Ranscombe
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ANOTHER week, another Scottish departure from the stock market. On Friday, Angel Biotechnology fell into the hands of administrators, triggering the suspension of its shares, while yesterday the directors at I-Design backed an £8.5 million cash offer from American customer Cardtronics.

The circumstances may be very different, but the two expected de-listings leave Scotland with a dwindling number of companies on the public markets. So should we be worried that we keep losing our Scottish stocks?

Digital Globe Services (DGS), an American online advertising firm run by Scots-born finance director Bruce Casely, summed up the case for becoming a listed company, ahead of its shares starting to trade today.

As well as raising £13 million to fund its expansion, DGS is joining the 
Alternative Investment Market to take advantage of the number of technology investors in London and raise its profile as it tries to break into Europe.

Raising cash – especially when interest rates on bank loans are so high – will always be the primary reason for a flotation, whether it’s to fund expansion or to trigger a change in ownership, letting a founder or private 
equity investors achieve their “exit”.

Yet raising your company’s profile shouldn’t be overlooked – after all, few customers will want to do business with an unknown supplier.

Then how can more companies be encouraged to use the stock market to promote themselves and grow? One of the answers could be the launch yesterday of the London Stock Exchange’s (LSE’s) “high-growth segment”, which aims to make it easier for fast-growing firms to float.

The CBI believes the initiative will be a big boost for medium-sized businesses, while roadshows such as those run around the country by the LSE can also shine light on what otherwise can be a mystifying process.

Trade bodies are getting in on the act too, with the Scottish Lifesciences Association and others running events on the pros and cons of flotations.

Yet possibly the best advert for the stock market is success stories like I-Design. The rewards that founder Ana Stewart and her husband, Ralph Hasselgren, will enjoy for selling their cash machine advertising firm may well inspire the next wave of Scottish entrepreneurs.

The company is the latest in a string of Scottish stocks to be swallowed up by overseas suitors. Fellow Dundee-based company Axis-Shield’s medical testing kits caught the eye of New York-listed Alere, while drugs being developed at Galashiels’ ProStrakan triggered a takeover by Japan’s KHK.

News yesterday of donations from the Bill & Melinda Gates Foundation and the Wellcome Trust, which uses cash from Wellcome’s sale to Glaxo, to Dundee University’s £6.5m drug discovery unit remind us of the good that can come from floats and sales.

Changing of the guard at the Bank of England

OUTGOING Bank of England governor Sir Mervyn King yesterday appeared to tip his hat in support of his replacement, Mark Carney.

King admitted the Bank would not try to bring inflation down to its 2 per cent target for fear of derailing Britain’s economy recovery, in effect lending support to Carney, who wants to see the target scrapped. With even the Bank ignoring the target, Carney’s argument is gathering weight.