Dirk Van Dijl, the inspirational promoter of this website, has advised me that last week’s blog (31.10.11 ‘Few Plus points for PLUS Markets’) received the second highest response rate in the two and a half years history of Enterprise Britain. I received a number of calls and emails from shareholders, market professionals and companies on PLUS Markets.
The overwhelming emotion was one of utter frustration. The management of PLUS Markets Group Plc is poorly rated. Its inability to formulate a strategy which will see the business move back into profitability (or even survive according to several opinions), and its myopic approach to the opinions of others, headed the list of criticisms. During the week there was some buying of the shares and the price rose but caution is still the watchword.
Despite the fact that the management, as said above, will ignore this blog, I am going to suggest to the team at PLUS how they might turn PLUS Markets around.
Simple. Re-position it.
“PLUS Markets is the venue for early stage equity fund-raising. The costs reflect what applicant companies can afford. The high risk involved is a function of company size.”
Nobody wants to mitigate against the current focus on the limiting of investor risk. It is the nature of risk that is the key to this proposal.
Last week I was at a meeting where a London broker quoted £750,000 for a company capitalised at £20m to apply to join AIM without a fund-raising.
PLUS Markets can structure exactly the level of due diligence needed for (say) £250,000.
There will be no difference in the quality of the process.
THE RISK lies in the size of the company. Earlier stage businesses have smaller executive strength, less experience and weaker balance sheets. Their capacity for withstanding setbacks will be less.
This is where the Drury safety-value comes into play. When a company joins PLUS Markets, 20% of the funds raised must be left with the advisers and released against the achieving of stated targets.
One of the main reasons why companies fail is because once the IPO is completed, the net funds are passed to the company and then there is virtually no check on what happens. In fact the only real control is with shareholders and, as the long suffering holders of PLUS Markets shares know, corporate governance is a myth dreamed up to keep committees of MPs occupied.
Having achieved momentum the management at PLUS Markets should then go and see Monsieur Rolet at the London Stock Exchange and suggest that all AIM companies with a capitalisation under £10m should be asked to move to PLUS Markets.
If Mr. Rolet does not share this vision I suggest PLUS Markets offer AIM companies a year’s free membership if they transfer. If the corporate advisers show some initiative anything is possible.
Suddenly PLUS might have 500/600 companies and a surge in new business as companies realise they can reach equity finance at an affordable cost.
Next week I will answer a number of other issues including market liquidity, the adviser structure, news flow and why Hong Kong holds a special secret for PLUS Markets
My plan is viable. It’s a huge ask to change a culture (ie. the polarised thinking about risk) but it can be done. Of course the cheap shot will be that “Drury is suggesting a higher risk market.” The smart thinkers will realise I am offering an exciting opportunity to build a market Britain can be proud of which will serve companies and shareholders alike.
And Dirk Van Dijl will be ecstatic because he set up Enterprise Britain to help the UK’s enterprise culture.