Why we invested in PrimaryBid
Buying shares in public companies has never been as easy as it is today. Retail investors have benefited significantly from the swathe of fintech disruptors that have almost completely democratised the secondary equity markets, where shares in listed companies are traded between investors. These disruptors enable individuals to buy as little as a fraction of a share on their mobile devices for little to no fees. Whilst this is clearly a significant leap forward, there continues to be a large segment of the equity capital markets that has remained a closed shop for retail investors.
Primary equity markets, where listed companies issue new shares to raise capital for purposes such as acquisitions, growth and working capital, continue to be offered almost exclusively to institutional investors and most often at discounted terms, resulting in billions of pounds in value creation for institutional investors. To put this into context, in 2018 alone listed companies in the UK tapped the public equity markets for approximately £5bn of new funding through IPOs, whilst raising a further £18bn through follow-on equity fundraisings. Looking globally across Europe, Asia and North America, this figure balloons to the hundreds of billions annually.
There are a number of factors that have driven this disparity between the treatment of retail and institutional investors in the primary markets, but in our view this boils down to two key reasons: regulatory hurdles and a distinct lack of innovation in investment banking. Quite simply, listed companies have not had the tools required to involve retail investors alongside an institutional fundraise in a manner that is as quick and efficient as institutional-only offerings, whilst also remaining compliant with market regulations.
PrimaryBid – the latest entrant to the portfolio which recently announced its £7m Series A funding round led by Outward VC and Pentech – was created precisely to address this problem. Its platform provides listed companies and their investment banking advisers with the infrastructure required to enable retail participation in institutional fundraisings. Once a deal is live, retail investors receive push notifications in real time through the user friendly PrimaryBid app which includes details of the offer, providing users with the ability to participate on the same discounted terms as institutional investors, with as little as £100 of investment. Once orders are aggregated and allocations for each retail investor is confirmed, the orders are routed and executed through retail stockbrokers connected to PrimaryBid’s platform.
One of the things we like most about PrimaryBid is the benefits it provides to the entire ecosystem. Retail investors are given access to a previously inaccessible asset class, listed companies are given access to a loyal and valuable pool of capital and liquidity, retail stockbrokers are able to offer a new product to their clients and benefit from execution flow, and investment banks are provided with the infrastructure to efficiently manage retail offerings as well as provide an innovative and differentiated solution for their listed clients. At a time where the role of investment banks in the equity capital markets is under growing scrutiny from shareholders, regulators and companies alike, this last point is why we believe the timing is right for PrimaryBid to become the key driver of innovation for the public markets. It is therefore no surprise that it has also caught the attention of the world’s leading stock exchanges, evidenced by the company’s long-term commercial agreement with Euronext.
What gives us further confidence in its potential is the unique founding team at the helm. Building and scaling a solution such as PrimaryBid requires a perfect blend of technology expertise, significant regulatory knowledge, public market transaction experience and deep industry relationships. In Anand Sambasivan (CEO), Kieran D’Silva (CFO) and James Deal (COO), we couldn’t have found a more impressive, ambitious and well-balanced team to tackle this market head on. In the time that we have known and worked with the team they have demonstrated that they possess both the expertise, gained through decades of experience across the buy-side and sell-side of the public markets, and most importantly the vision to grow PrimaryBid into a future category leader in this space.
For retail investors, PrimaryBid will no doubt be seen as an exciting and long awaited break-through. For us, PrimaryBid is the future of the equity capital markets.