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FinnCap’s avoids embarrassment as market float overcomes Brexit 'risk-off' challenges

Brexit has evidently made raising capital tougher in the City, though it’s not the only blight as the square mile continues to adapt to regulatory reforms
London Stock Exchange
finnCap's 28p per share IPO, valuing the broker at £47.1mln

Like the sight of a broken down mechanic or a food-poisoned chef, it would’ve been a particularly bad look had City broker finnCap Group Plc (LON:FCAP) failed to raise itself sufficient funds to complete its AIM market IPO.

There was, then, a degree of relief as well as a celebration for the City firm on Wednesday as its shares began trading on London’s junior bourse.

It comes at a time when the City’s brokerages are undergoing another phase of stress and transformation.

Ten years may have passed since the trauma of the financial crisis, nevertheless, the industry is still dealing with some of the hangovers and regulatory reforms that followed.

And, now, as an uncertain Brexit looms there are further pressures for those with businesses built upon occasionally fickle financial markets.

Evidently, pitching a capital raise and stock market float in the fourth quarter of 2018 wasn’t the easiest sell.

READ: Shares in broker finnCap start trading on AIM

FinnCap, nevertheless, got its £5mln share sale away - raising £3.75mln of new funds, and, selling a further £1.25mln worth of shares on behalf of existing shareholders.

“In this market, it was a bit of a result, I have to say, it was getting a bit stressful towards the end,” finnCap chief executive Sam Smith told Proactive Investors.

She added: “I think it was just [a lack of] risk appetite.

“I think it is not just Brexit, but, Brexit did start booting the market three weeks ago. Our first week of marketing was ok, the second week of marketing was quite a lot different.”

Although there’s been a renewed ‘risk-off’ attitude in the stock market over recent weeks because of Brexit, finnCap’s placing highlights that funds can still be secured.

“IPOs are difficult [at the moment] because they very much go with the market, but, we always say to our clients that if you’ve got a good business you can always raise the money,” Smith said.

“It definitely has been a lot harder, but, we have still done it. So, it is possible, and, we do know of other businesses that should be IPO’ing in the next few weeks as well.”

Shares sale and Cavendish acquisition

FinnCap sold shares priced at 28p per share in the placing, setting a market capitalisation of around £47.1mln for the business.

It allows the broker to complete its proposed acquisition of Cavendish Corporate Finance for £14mln.

The Cavendish acquisition brings together two of the City’s most established names and comes amid a regulatory shakeup of the broking sector.

Perhaps significantly, the acquisition builds on finnCap’s strategy to become a ‘one stop shop’ service provider for growth companies, both public and private.

New EU rules changing the way brokers can charge clients for research have hit revenues, prompting a consolidation in the industry.

Last month brokers SP Angel and Northland Capital announced they were in talks about a possible merger. In September, Sky News reported that Spanish bank Banco Santander was in talks to buy stockbroker Peel Hunt.

Elsewhere, today, Numis saw its AIM-quoted shares fall after it reported a drop in full-year profit. It pointed to increased investment and as it cautioned over increasingly challenging markets ahead, whilst showing profit was down 17% to £31.61mln. Revenue, meanwhile, was marked 4.5% higher at £130.1mln.

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finnCap Group Plc Timeline

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