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LSE AIM IPO - Iroko update 2018 - Irokotv 2019


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Based on our direct conversations with stockbrokers, NOMADs, auditors and lawyers, an LSE AIM listed company valued at $100m would need to have (ultra conservatively) $8–10m in revenue and $0–1m in EBITDA.

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LSE AIM IPO - Iroko update 2018 - Irokotv 2019

  1. 1. Accessing London’s Global Capital Markets Discussion Material October 2019
  2. 2. 2 £1 quadrillion Derivatives cleared by SwapClear in 2018 to support G20 and global financial stability £12 trillion Assets under management using our benchmarks £7.8 trillion Total money raised on London Stock Exchange in the last decade London Stock Exchange Group A diversified market infrastructure provider, established in 1801
  3. 3. High Profile Listings on LSE in 2019
  4. 4. 44 79 IPOs on London Stock Exchange in 2018 raised a combined £9 billion, the highest number of IPOs in Europe. AIM is the most successful growth market in Europe with 36 AIM IPOs. £36bnA total £36bn equity capital was raised in London in 2018 through IPOs and follow on issuance. The two years following Brexit have been two of the most active for London Stock Exchange in a decade, recording the highest and third highest annual activity for equity listings in London since 2008 (650+ transactions in 2018). 21 IPOs and a further 32 introductions and new listings from international companies. 3 of the 5 largest IPOs on LSE were international. 79IPOs 53 int’l listings This is a five-year high for the sector and we have seen more tech IPOs on London Stock Exchange than any other European exchange. Avast, the largest tech IPO in 2018 raised £602m on London. 21 Source: Dealogic, London Stock Exchange data, November 2018 Key Highlights from 2018 Strong position for international and tech IPOs Tech IPOs
  5. 5. 55 Strong Levels of Equity Issuance in 2019 So far £24bn has been raised in London through IPOs & FOs London was the most active equity market in Europe between Q1-Q3 2019, with: ⎯ 2.5x more transactions (418 IPOs & FOs) than the next most active market, Stockholm (164 IPOs & FOs) ⎯ 2.3x more raised in IPO and FO proceeds (£24.0bn) than the next largest peer, Frankfurt Stock Exchange (£10.7bn) Source: Dealogic, October 2019 All calculations are based on a deal pricing date *A new listing as a part of Shanghai-London Stock Connect Top 10 European Exchanges by IPO & FO Capital Raised in Q1-Q3 2019 Top Global Exchanges by IPO & FO Capital Raised in Q1-Q3 2019 Top 5 deals in Q1-Q3 2019 on London Stock Exchange Deal type Capital raised (£m) AstraZeneca FO 2,685 Huatai Securities IPO* 1,334 Network International IPO 1,218 Trainline IPO 1,093 Marks & Spencer Group FO 614
  6. 6. 6 “London remains a top IPO destination despite the uncertainty that surrounds Brexit; investors do not think that IPOs will dramatically shift to Euronext or the Deutsche Borse.” PwC, Capital Markets in 2030* No Slowdown Since Brexit Referendum Global companies come to London to meet global investors Raised over £137 billion in 8 different currencies. In the year following the referendum (2017), we saw a record 108 IPOs, none of which were passported to other EU jurisdictions. 2,131 equity deals 482 of these equity transactions were by 237 international issuers from 56 countries raising an aggregate £29 billion. 237 int’l issuers Raised a combined £1.4 trillion in 35 different currencies. 2,663 debt securities 1,428 of these debt transactions were by international issuers from 52 countries raising an aggregate £564 billion, including 23 bond switches from European exchanges. 52 countries 665 ETPs (947 including multi-currency offerings) in EUR, GBP, GBX, USD and CNY 665 ETP listings For ETPs listed since 23 June 2016 over 97% track non-UK underlying (i.e. not made up of purely UK based underlyings). 97% non-UK Source: London Stock Exchange, Dealogic, Bloomberg, October 2019 All figures since 23 June 2016 *
  7. 7. 77 Source: EPFR Global, June 2019 Referendum, June 2016 Article 50 triggered, March 2017 Total Net Assets into UK Mandated Funds is up 8% to $288bn since the Referendum $288bn Monthly Flows and Allocations into UK Mandated Funds London: Dedicated Pool of UK Capital $288bn of capital within UK only listed fund mandates 267 276 288 -4 -3 -2 -1 0 1 2 0 50 100 150 200 250 300 350 400 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 In/outflow($bn) AuM($bn) Total AuM MoM in/outflow Over the past 3 years, UK-mandated equity funds have increased their allocation to the materials sector to 9.1% ($26.2n) $26.2bn % of UK-mandated Equity Funds Allocated to Materials 5.8 9.1 0 2 4 6 8 10 12 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 %
  8. 8. 8 NASDAQ and NYSE — London has the most diverse investor base of any major global exchange, while still allowing issuers to tap US institutional investors. — This allows issuers access to a pool of capital that is comfortable with companies who build internationally facing business models. Domicile of Top investors in listed securities in the US* 2% Rest of World 6%Europe (ex UK) 85%North America 7% UK Source: FactSet, October 2019 *Based on the Value of Securities Held A Globally Diverse Investment Base Gain access to the most internationally diverse pool of investment Domicile of Top investors in listed securities in London* LSE 5% Rest of World 15% Europe (ex UK) 31% North America 49% UK Largest Institutions Investing in LSE Listed Stock Investor Country BlackRock Investment Management (UK) Ltd. United Kingdom The Vanguard Group, Inc. United States Legal & General Investment Management Ltd. United Kingdom Norges Bank Investment Management Norway BlackRock Fund Advisors United States Capital Research & Management Co. United States
  9. 9. 9 Benefits of Listing in London Access the deepest pool of international capital in the world Reach a broad and stable investor base Respected, balanced and fair regulatory environment and legal framework Enhance profile, status and visibility Proven levels of sustained liquidity in a central time zone Capital to fund acquisitions and expand into new markets Flexible entry points – Premium, Standard, HGS, SFS & AIM Quality of advisory community and sell-side research coverage Resilient market technology and world-class market surveillance
  10. 10. 10 Markets that Support Growth Our choice of equity markets The Group supports businesses at every stage of growth, shining a spotlight on the companies of tomorrow. Fundingrequirement Friends & Family Start - Up Early Stage Expansion Consolidation & further capital raising Diversification of investors, M&A and International Expansion Concept & seed stage £500k £1m £100k £50k £150m £1bn Private Equity Seed Capital Business Angels Venture Capital Strategic consideration ➢ Routes to growth ➢ Unearthing the most inspiring companies across the globe
  11. 11. 11 Recent Highlights & Transactions on the world’s most successful growth market Averageperformance ofAIM 100 companies(blue)vsFTSE100(gold)over thelastfiveyears +56% Averagemarket capofAIM companies Averagemoneyraised at IPO by AIM company AIM remains avery international market 72 +16% Of all AIM companies International companies floated in the last5 years Currentnumber of companies onAIM: 882 14% 2018 2008 2018 2008 Source: LSE statistics, Dealogic, Bloomberg, October 2019 *Weighted by market cap at offer £99m £24m $30m £24m £10m
  12. 12. 12 158 100 289 132 163 25 15 0 50 100 150 200 250 300 350 Profile of AIM Companies Fundraisings on AIM – 1995 to 2019 YTD A Snapshot of AIM £115 billion raised since launch 882 companies, aggregate value of £95bn (129 Int’l companies) Admissions to AIM - 1995 to 2019 YTD Industries represented (by no. companies) Since 1995 c. £115bn raised in total (£69bn through further issues) 0 5 10 15 20 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 MoneyRaised(£bn) New Further 0 100 200 300 400 500 600 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 UK International 51 60 91 135 88 215 97 120 13 12 Basic Materials Consumer Goods Consumer Services Financials Health Care Industrials Oil & Gas Technology Telecommunications Utilities Sources: LSE, October 2019
  13. 13. 13 Comparing AIM and Main Market Source: LSE, Dealogic, October 2019 Number of issuers by market cap band Top 10 Institutional Investors AIM Rank Institutional investor (parent level) Market cap held (£bn) 1 Invesco Ltd. 2.3 2 Canaccord Genuity Group, Inc. 2.2 3 Liontrust Asset Management Plc 1.8 4 Standard Life Aberdeen Plc 1.6 5 Hargreaves Lansdown Plc 1.5 6 Octopus Capital Ltd. 1.5 7 Merian Global Investors (UK) Ltd. 1.4 8 BlackRock, Inc. 1.2 9 Investec Plc 1.0 10 Schroders Plc 0.8 Main Market Rank Institutional investor (parent level) Market cap held (£bn) 1 BlackRock, Inc. 144.6 2 The Vanguard Group, Inc. 77.4 3 Standard Life Aberdeen Plc 66.1 4 The Capital Group Cos., Inc. 59.7 5 Legal & General Group Plc 49.7 6 Government of Norway 48.7 7 State Street Corp. 45.3 8 Invesco Ltd. 35.9 9 Schroders Plc 28.4 10 M&G Plc 24.8 163 98 290 125 162 29 15 65 22 96 87 336 142 231 66 74 0 50 100 150 200 250 300 350 400 £0-5m £5-10m £10-50m £50-100m £100-500m £500m-£1bn £1-5bn £5-10bn £10bn+ AIM Main Market
  14. 14. 14 274 622 0.32% 0.24% 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 0 50 100 150 200 250 300 350 400 450 500 550 600 650 AIM Main Market AIM Main Market Last 6 months Average Daily Traded Value ($m) Free float adjusted daily traded volume AverageFreeFloatadjusteddailytradedvolume(%) AverageDailyTradedValue($m) Comparing Liquidity Greater liquidity on AIM as a percentage of free float Sources: Bloomberg, October 2019 Liquidity across AIM and the Main Market
  15. 15. 1515 2019 Q1-Q3 capital raised across European Growth Markets Source: Dealogic, October 2019 First North classification includes: FN Stockholm, FN Denmark, FN Finland, FN Lithuania Euronext classification includes: Euronext Paris (no capital was raised in other Euronext Growth markets) Other includes: Oslo Axess, MAB, Nordic Growth Market, BX Swiss, NEX and Warsaw New Connect − In 2019 Q1-Q3, AIM continued to drive growth market capital raising in Europe, accounting for 65% of all IPO and FO capital raised and 3.2x more than the next European Growth Market (First North) − In total, there were 279 deals, raising £398m through IPOs and £2.7bn in FOs − 7 of the top 10 European growth market IPOs during Q1-Q3 took place on AIM, yet again dominating Europe Top 5 2019 Q1-Q3 European Growth Market IPOs Top 5 2019 Q1-Q3 European Growth Market FOs Company EGM Proceeds (£m) Millenium Hotels Madrid 224 UniPhar AIM 126 Loungers AIM 83 Brickability AIM 57 Argentex AIM 46 Europe’s Growth Market Engine 65% of Q1-Q3 European growth market capital was raised in London Company EGM Proceeds (£m) Globalworth AIM 300 THQ Nordic Stockholm 173 GB Group AIM 160 Hipgnosis Song Fund AIM 142 Greencoat Renewables AIM 126 3.2x more capital raised Share of EGM capital raised
  16. 16. 16 Helping Address Pre-IPO Questions Which advisers and in which order? Have we got the right resources to manage an IPO? What are the key IPO workstreams? When do we need to start hiring a board? How long will an IPO take? When to start? What is current IPO execution best practice? Navigating new IPO rules? What is current receptivity of investors? What changes as a public company?
  17. 17. 17 LSE Premium listed corporates issue CDRs listed on SSE SSE listed corporates issue GDRs listed on LSE Shanghai-London Stock Connect Allowing UK listed companies direct access to China for first time
  18. 18. London’s Technology and High Growth Sector
  19. 19. 19 Source: LSE, company website, Dealogic, FactSet, August 2019 The Home of Landmark Issuances Landmark international IPOs in London April 2019 Network International With $1.6bn capital raised, Network International is the largest ever Middle East & African (MEA) IPO on London Stock Exchange and largest tech MEA IPO globally since 2014. “I am delighted that Network International will join London Stock Exchange today through a Premium Listing on the Main Market, marking an exciting new stage in our journey. […] The Middle East and Africa are at an early stage in the shift from cash to digital payments and our new listing on London Stock Exchange will enable all new shareholders to benefit from this structural growth opportunity.” Simon Haslam, CEO, Network International June 2019 Trainline The transaction was substantially upsized from target of 50% free float to a final free float of 65%. Given the strong share price performance, the over- allotment option exercised in full before the end of conditional dealings. “This is an incredibly exciting achievement for all of us at Trainline. I am extremely proud of our Trainline team and I want to thank every one of them for the role they have played in growing the company to become the leading independent rail and coach travel platform globally, focused on encouraging more people to make more environmentally sustainable travel choices.” Clare Gilmartin, CEO, Trainline May 2019 Finablr A global platform for payments and foreign exchange solutions, Finablr raised $394.3m on Premium segment of London Stock Exchange, a continuation of MEA tech success stories. “Today marks a momentous milestone for Finablr and the beginning of an exciting new era to support the Company’s growth and development. We are very confident about the long term prospects of the business and remain committed to generating the greatest value for our all our shareholders. I would like to take this opportunity to thank our global teams for their passion and commitment." Dr. B R Shetty, Founder and Co-Chairman of Finablr
  20. 20. 20 Source: FactSet and LSE calculation, October 2019 Note: Technology ICB Industry classification used London’s Technology Industry LSE is home for 169 technology companies from 24 countries Geographical Breakdown of Institutional Investors $244.3bnTotal Market Capitalisation 169Number of technology companies 45% 26% 23% 3%3% United Kingdom Europe (ex. UK) North America Asia RoW Top Institutional Investors Value Held $bn BlackRock, Inc. 23.6 The Vanguard Group, Inc. 13.2 The Capital Group Cos., Inc. 12.9 Standard Life Aberdeen Plc 9.4 Legal & General Group Plc 8.0
  21. 21. 21 3,434.1 2,346.0 401.3 55.2 9.5 8.9 7.8 6.8 4.9 3.2 0 1 2 3 4 5 6 7 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 LSE Borsa Italiana Oslo Børs Malta Stock Exchange Warsaw Euronext Paris Nasdaq OMX Stockholm Nasdaq OMX Helsinki Istanbul AktieTorget No.ofIPOs IPOcapitalraised($m) IPO capital raised ($m) No. of IPOs Leader in Europe No.1 in Europe by the number and capital raised by tech IPOs Top 10 European exchanges by tech IPO capital raised in H1 2019 Source: Dealogic, August 2019 All calculations are based on a deal first trade date $3.4bn Capital raised through Tech IPOs in London in 2018 6 Total number of Tech IPOs in London in H1 2019 1.5x More capital raised by tech IPOs in London than in the next European competitor
  22. 22. 22 191 184 131 105 71 49 45 36 36 31 0 50 100 150 200 250 ASX NASDAQ London Stock Exchange NYSE HKSE Tokyo Stock Exchange First North Stockholm Shenzhen Stock Exchange Frankfurt Stock Exchange Korea Exchange No.ofdeals IPO Follow-on 3rd Largest Exchange for Tech Globally A growing presence of technology companies Top 10 global exchanges by the number of tech IPO & FO deals in 2018 - H1 2019 Source: Dealogic, July 2019 $9.65bn Capital raised through Tech transactions between 2018 – H1 2019 131 Total number of Tech transactions (IPO and FO) in London between 2018 – H1 2019
  23. 23. 23 Europe vs US Tech Europe attracts more tech companies 31 41 41 48 66 86 29 46 60 31 25 40 53 27 0 10 20 30 40 50 60 70 80 90 100 2013 2014 2015 2016 2017 2018 2019 H1 No.ofIPOs Europe North America European vs US exchanges by the number of tech IPOs Tech surge in Europe continues: Europe attracts more tech companies than US exchanges since 2015 Source: Dealogic, August 2019 US exchanges are NYSE and Nasdaq
  24. 24. 24 Secondary Selldown Comparisons Exits at IPO are more prevalent in London Source: Dealogic, August 2019 *US exchanges are NYSE and Nasdaq 59 98 68 98 69 94 68 95 52 88 41 2 32 2 31 6 32 5 48 12 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% London USA London USA London USA London USA London USA 20152016201720182019H1 % Primary % Secondary London vs US exchanges* by the average % of secondary selldowns (existing shareholders exits) at IPO Average proportion of secondary selldowns, % sold by existing shareholders, are significantly higher in London (37%) than in US (5%)
  25. 25. 25 Company Name Trainline Network International Avast Funding Circle Integrafin AJ Bell Sensyne Health Boku Blueprism Sector Technology Payments solutions Cybersecurity Online lending market place Investment platform Investment platform Healthcare technology Mobile payments platform Process automation 1yr Forward Price/Sales 7.3x 9.2x 5.1x 1.6x 10.9x 12.7x 22.8x 5.0x 4.8x 1yr Forward EV/EBITDA 23.6x 19.6x 11.7x 7.8x 19.4x 30.5x 12.4x 17.0x 8.9x 1yr Forward P/E 38.5x 31.5x 14.6x 7.4x 27.1x 40.9x 65.3x 31.0x 10.1x 2yr Forward Price/Sales 6.3x 8.1x 4.8x 1.3x 9.9x 11.4x 8.2x 4.2x 3.2x 2yr Forward EV/EBITDA 18.7x 16.9x 10.9x 17.5x 16.8x 26.7x 28.4x 11.4x 15.7x 2yr Forward P/E 27.3x 25.0x 13.5x 11.0x 3.3x 35.0x 51.1x 18.8x 17.2x Expected sales growth % (1 year) 35.4% N/A 20% 41.1% 15.3% 31.3% 5,221.0% 90.1% 190.8% Revenue generating? ✓ ✓ ✓ ✓ ✓ ✓  ✓ ✓ Profit generating  ✓ ✓  ✓ ✓    Recent Tech IPO Multiples UK tech investors willing to pay growth multiples at IPO Source: FactSet, October 2019
  26. 26. 26 0x 2x 4x 6x 8x 10x 12x 8x8 MobileIron LoopUp Personal Group 0x 1x 2x 3x 4x 5x WNS Holdings Unisys iEnergizer Serco Group 0x 2x 4x 6x 8x 10x 12x First Data Total System Services First Derivatives Integrafin Online Estate Agents Source: FactSet, August 2019 NTM Price/Sales EV/Sales London listed US listed Valuation is Not Driven by Listing Venue UK tech IPOs compares favourably with US peers Fintech Online Food Delivery Software as a Service Business Process OutsourcingSoftware Automation 0x 5x 10x 15x 20x 25x 30x 35x Computer Services Blue Prism 0x 4x 8x 12x 16x 20x Zillow Rightmove 0x 2x 4x 6x 8x 10x 12x GrubHub Just Eat
  27. 27. 27 2017 Fintech Surge Begins In 2017, London Stock Exchange welcomed three Fintech companies. This included Boku Inc., a provider of online mobile payments. 2018 Fintech Surge Builds 2018 was a record year for Fintech companies at London Stock Exchange. 7 new joiners ranged from payment solutions providers to online lending platforms. 2019 Fintech Surge Goes International In H1 2019, 2 Fintech companies joined London Stock Exchange. Both companies operate as payments solutions providers in Middle East. London’s Fintech Surge 2019 attracts international payments companies Source: Dealogic, FactSet, July 2019
  28. 28. 28 Case Study Company Description Boku is a leading provider of carrier billing services connecting merchants with mobile network operators in 50+ countries. Founded in 2008 in San Francisco it acquired two UK based businesses (Paymo and Mobilcash) and processes around $1bn transactions annually. Boku had previously raised c. $87m in 6 funding rounds with VCs including Andreesen Horowitz, Benchmark, Index, Khosla and NEA. Boku Inc Key Financials at IPO Revenue EBITDA 2015 $19.2m -$11.4m 2016 $17.2m -$12.3m Source: LSE, company website, Dealogic, FactSet, Bloomberg, October 2019 Price performance rebased to 100 as at date of admission For the six months ended June 30, 2017, Boku's revenue was $10.2 million, up from $8.4 million the year before, with underlying EBITDA a loss of $2.8 million, narrowed from $7.2 million in the equivalent period last year. Boku reported positive adjusted EBITDA for the month of September 2017. Partial exit for VCs at IPO and Growth Capital Current Valuation EV/Sales EV/EBITDA 2018E 5.5x 43.9x 2019E 4.7x 15.9x Company name Boku Inc LSE market AIM FTSE ICB sector Support Services Main country of operation United States (Delaware incorporated) Admission date 20 November 2017 IPO deal size $59.6m (primary: $19.9m, sec: $39.7m) Market cap at admission $166.6 million Current market cap $311.9 million Nomad Peel Hunt Top 5 Institutional Investors (value held $m) River & Mercantile Group Plc Merian Global Investors (UK) Ltd. Schroders Plc Danske Bank A/S Swedbank AB 15.0 13.8 10.5 9.9 8.9
  29. 29. London Stock Exchange Group in Africa
  30. 30. 30 LSEG & Africa A relationship dating back nine decades ̶ London Stock Exchange Group’s connection with Africa stretches back nine decades to 1938 when the first African firm listed on LSE ̶ That company was African Explosives & Industries (now known as AECI); which made blasting explosives and detonators for the gold and diamond mining industries in South Africa
  31. 31. 31 LSEG & Africa Collaborative efforts driving the continent forward Key collaborative partnerships and initiatives ̶ LSEG has, to date, published two “Companies to Inspire Africa” reports (2017 and 2019), aimed at profiling some of Africa’s of the most exciting high-growth businesses. ̶ LSEG hosted a Forum in October 2018 in partnership with CDC Group to address barriers to investment in Africa. ̶ LSEG works closely with eight major African exchanges (including JSE, Botswana SE Exchange and Casablanca SE) providing trading software and clearing technology. ̶ LSEG has also partnered with a number of exchanges to enable dual-listings for companies looking to simultaneously list shares in both Africa and London (e.g. Nigeria’s Seplat Petroleum) ̶ LSEG’s FTSE Russell has long-standing relationships in Africa, having worked with JSE to calculate domestic indexes since 2002. More recently, FTSE Russell collaborated with the Nairobi SE (2011) and Namibian SE (2016) ̶ In March 2016, LSEG brought together a dozen highly regarded business leaders, policymakers and investors from across the African continent to form an Africa Advisory Group (LAAG), which acts as a forum to discuss the development of Africa’s capital markets
  32. 32. 32 Home for African Issuers Supporting the development of African Capital Markets Source: FactSet, Bloomberg, Dealogic, October 2019 *The table displays data on currently listed bonds on LSE as of January 21, 2019. RegS and 144A are consolidated 14 African debt issuers 51 active bonds London DCM credentials* London ECM credentials $22bn+ raised since 2008 $161bn total market cap 112 listed companies $55bn+ raised since 2008 South Africa BotswanaNamibia Zimbabwe Zambia Mozambique MalawiAngola Democratic Republic of Congo (DRC) Rep. of Congo Tanzania Uganda Kenya Madagascar Mauritius Burundi Rwanda Cameroon Nigeria Niger Burkina Faso Mali Ghana Cote d’Ivoire Liberia Sierra Leone Senegal Morocco Cape Verde Egypt Tunisia Guinea Central African Republic Eritrea Gabon Equatorial Guinea LSE is the #1 exchange for African issuers outside Africa and the second largest African exchange globally (behind JSE)
  33. 33. 33 Strong Presence of African Corporates Overview of African companies listed on LSE LSEG market infrastructure technology is deployed in 10 African markets, including the Johannesburg Stock Exchange Source: Dealogic and LSE, October 2019 Note: Country of Primary Business has been used to calculate these statistics $161bn Total market cap of African companies listed on LSE 112 African companies currently listed on LSE $1.8bn Raised by African Companies on LSE in 2019YTD 5749 4 2 AIM Main Market ATT PSM 112 African Issuers per LSE Market 42 17 7 6 5 5 4323 Mining Oil & Gas Producers Industrial Metals Banks Food Producers General Financial Real Estate Investment & Services General Industrials Others 112 African Issuers per ICB Sector
  34. 34. 34 Overview of African Transactions on LSE Capital raised since 2013 Source: LSE, Dealogic, October 2019 Top3dealsforthe year - 10 20 30 40 50 60 0.0 0.5 1.0 1.5 2.0 2.5 2013 2014 2015 2016 2017 2018 2019 YTD No.ofdeals Capitalraised($bn) Follow-On IPO No. of deals
  35. 35. 3535 Recent African IPOs and Introductions Sector diversification and strong Africa representation Admission date Issuer Money raised ($m) Current market cap ($m) LSE Market ICB Sector 15-Oct-19 Helios Towers 317 1,546 Main Market Telecommunications 28-Jun-19 Airtel Africa 687 2,663 Main Market Telecommunications 20-Jun-19 Resolute Mining N/A – Introduction 739 Main Market Mining 28-May-19 SDX Energy N/A – Introduction 58 AIM Mining 30-Nov-18 Kropz plc 35 33 AIM Mining 26-Nov-18 MOD Resources N/A - Introduction 101 Main Market Mining 21-Nov-18 Wentworth Resources plc N/A - Introduction 46 AIM Oil & Gas Producers 18-Oct-18 Alexandria Mineral Oils Company (Amoc) S.A.E. N/A - Introduction 323 ATT Oil & Gas Producers 31-Jul-18 Grit Real Estate Income Group 132 330 Main Market Real Estate Investment & Services 31-Jul-18 Kavango Resources plc 2 5 Main Market Industrial Metals & Mining 24-Jul-18 Danakali ltd N/A - Introduction 115 Main Market Mining 13-Jul-18 ASA International Group plc 182 397 Main Market Financial Services 29-Jun-18 RA International Group plc 25 86 AIM General Industrials 26-Jun-18 Old Mutual Limited N/A - Introduction 6,440 Main Market Life Insurance 18-May-18 Serinus Energy plc 14 37 AIM Oil & Gas Producers 04-May-18 Vivo Energy plc 603 1,957 Main Market General Retailers 29-Mar-18 Kore Potash 9 27 AIM Mining Source: LSE, company website, Dealogic, FactSet, October 2019
  36. 36. 36 973 Total number of institutional investors and capital invested in each African Stock Exchange: 121 136 3,898 Total number of institutional investors on LSE 2,046JSE Number of institutional investors unique* to LSE and capital invested in London-listed securities versus: 2,577 Nigerian 2,566 NSE 2,042 All three Exchanges Source: Factset, April 2019 *Unique investor analysis is on a parent institutional investor level London Attracts over 2000 Unique Investors Versus JSE, NSE and Nigerian Stock Exchange combined $1.19tn $2.12tn $2.12tn $1.19tn $229bn $1.5bn $1.6bn
  37. 37. 37 Case Study Company name Helios Towers Plc LSE market Main Market – Premium FTSE ICB sector Telecommunications Service Providers Main countries of operation Tanzania, DRC, Congo Brazzaville, Ghana, South Africa Admission date 15 October 2019 Money raised at admission $317.2 million Market cap at admission $1,458.9 million Current market cap $1,545.8 million Bookrunners BofA Merrill Lynch, Jefferies, Standard Bank (Joint Coordinators), EFG Hermes, Renaissance Capital “Today marks the start of the next exciting chapter in the Company’s history and we are delighted Helios Towers is to begin trading as a public Company on the London Stock Exchange. We look forward to working with our high-quality institutional shareholder base as we seek to leverage the compelling opportunities in our markets.” Kash Pandya, CEO Listing Story Helios Towers is a leading Sub- Saharan independent tower company, with operations across five countries in Sub-Saharan Africa. It’s principal business is operating owned telecommunications sites and related infrastructure. The IPO raised $317.2 million giving the company a valuation of $1.46 billion. Helios Towers was the second African, telecommunications company to list in London in 2019 after Airtel Africa. The firm is looking to grow both in it’s current markets but also with the potential to expand into new geographies too. This includes construction of additional sites, expansion into adjacent technologies and strategic acquisitions of site portfolios. Source: LSE, company website, Dealogic, FactSet, October 2019 Helios Towers Key Financials at IPO Revenue EBITDA 2018 $356m $180m 2019 (1/2 year) $190.7m $99m The company’s aim in joining public markets is to raise capital to fund future growth opportunities in line with the firm’s strategy as well as maintaining and expanding relationships with customers.
  38. 38. 38 Case Study Listing Story The Company pursued an IPO to help the subsidiary derive better value and enable the parent company in India to lower its debt. The Offer was made up of 100% primary proceeds with 18% of the company sold. Source: LSE, company website, Dealogic, FactSet, October 2019 Airtel Africa The pricing of 0.8p per share implied a trailing EV/EBITDA of 5.3x, largely in line with its global peers. The offer was oversubscribed with strong interest from a variety of global investors across the UK, US and MEA. Airtel Africa is a leading provider of telecommunications and mobile money services, with a presence in 14 countries, primarily in East Africa and Central and West Africa. Each of the 14 markets the Company operates in demonstrates strong GDP growth potential, with young and fast-growing populations. Airtel Africa’s shares also began trading on the Nigerian Stock Exchange on 9 July, making it the first dual-listed NSE and Premium Main Market issuer. Company name Airtel Africa Plc LSE market Main Market FTSE ICB sector Telecommunications Main country of operation Pan-African Admission date 28 June 2019 Money raised at admission $687 million Market cap at admission $3,814 million Bookrunners Citi, BAML, JP Morgan, ABSA, Barclays, BNP Paribas, Goldman Sachs, HSBC, Standard Bank “The strong support we have received from institutional investors demonstrates the attractive investment proposition Airtel Africa offers the market… to deliver on a clearly defined strategy to build Airtel Africa into a market-leading mobile service provider, increasingly expanding beyond voice into data services and Airtel Money. The Board would like to thank those involved in the process and looks forward to supporting the management team as they execute on the strategy.” Sunil Bharti Mittal, Chairman
  39. 39. 39 Case Study Company name Resolute Mining LSE market Main Market – Standard FTSE ICB sector Mining Main countries of operation Australia, Ghana, Mali Admission date 20th June 2019 Market cap at admission $624.2 million Advisers Berenberg, Bryan Cave Leighton Paisner “We are delighted to be celebrating Resolute’s London Stock Exchange listing today. This milestone marks the company’s next significant phase of growth and will provide us with a greater platform from which to access a larger global pool of investors. The LSE is home to some of the world’s largest mining companies and we look forward to joining the ranks of the African mid-tier gold producers, alongside a market that has a good understanding of both the gold sector and the African mining environment.” John Welborn, CEO Listing Story Resolute Mining Limited engages in the mining, exploration, development, and production of gold properties in Africa and Australia. The company currently owns three mines; the Syama gold mine in Mali, Ravenswood in Australia and Bibiani in Ghana. The estimated capacity of these mines is c. 500,000 oz per annum. Resolute Mining admitted shares for trading on the Standard segment of the Main Market on 20th June 2019 by way of an introduction. The company will maintain its listing on the Australian Stock Exchange and looks to boost liquidity via the listing on LSE. Resolute marks the 22nd currently active dual-listing between the LSE and ASX. Source: LSE, company website, Dealogic, FactSet, October 2019 Resolute Mining Adding a London listing to expand its investor base Top 5 Institutional Investors (value held $m) ICM Investment Management Ltd. Van Eck Associates Corp. L1 Capital Pty Ltd. Dimensional Holdings, Inc. The Vanguard Group, Inc. 106.4 78.6 43.4 37.7 25.1
  40. 40. 40 Case Study SEPLAT Facilitating a Dual-Listing for Nigerian Corporates Through established mechanisms Average Daily Traded Volume (last one year) 44.8% Lagos line 55.2% London line Top 5 Institutional Investors (value held $m) Sustainable Capital Ltd. Jupiter Fund Management Plc Standard Life Aberdeen Plc Sanlam Ltd. Eaton Vance Corp. 34.5 4.5 3.9 2.5 2.3 Company name SEPLAT Petroleum Development Company LSE market Main Market - Standard FTSE ICB sector Oil & Gas Producers Main countries of operation Nigeria Admission date 9 Apr 2014 Money raised at admission $538 million Market cap at admission $1,903 million Current market cap $839.5 million Bookrunner(s) / Nomad BNP, Standard Bank, Renaissance Securities, Citigroup Global and RBC Listing Story SEPLAT is an oil and gas exploration and production company incorporated and operating in Nigeria. Since commencing production in 2010, the company has increased oil and gas production in each year of operation to become a leading indigenous oil and gas operator in Nigeria. From a gross operated oil production of 14,000 boed at inception, the company has maintained strong production growth with output rising to 70,000 boed in total operated production as at June 2013. SEPLAT became the first Nigerian company to be dual listed on both the LSE and the NSE. The IPO proceeds will primarily be used to acquire and develop new acquisitions The Company issued 143,284,130 new Ordinary Shares at a price of 210 pence per share (NGN 576 per share for NSE listed shares) raising $503 million. Source: LSE, company website, Dealogic, FactSet, October 2019 Price performance rebased to 100 as at date of admission
  41. 41. 41 Source: Company website, Dealogic, FactSet, January 2017 *The International Securities Identification Number (ISIN) is a code that uniquely identifies a specific securities issue — London and Lagos listed shares are fully fungible, trading under the same ISIN* and in two currencies (GBP and Naira). — Innovative cross exchange mechanism that meets the needs of investors and Nigerian capital controls. — LSE has worked with UK and Nigerian market participants to ensure Nigerian’s capital export certificate system is embedded in the connectivity mechanism, and cross- border settlement. — Close cooperation within two market communities to deliver project. Full Fungibility Between UK and Nigeria Seplat – A pioneering transaction linking two markets Stock Exchanges Regulators Clearing SystemsRegistrars Nigeria Depositary & DI Issuer UK Custodians Nigeria Seller Buyer Communicates “sell” order to Trader / Broker Orders matched Sends SWIFT instruction Buyer(s) trading account Funds Shares Computershare cancels and marks- down DI issuance position in UK register Seller(s) CREST account UK Trader/ Broker submits “DI cancellation to Computershare Computershare instructs custodian to transfer underlying shares) for onward settlement removal request Trader(s) CREST account Seller(s) CSCS account Funds Computershare share position in CSCS under Custodian Trader(s) Communicates “buy” order to Trader / Broker Sends SWIFT instruction DIs Trader(s) CSCS account Funds UK Nigeria
  42. 42. 42 Case Study Company name Vivo Energy Plc LSE market Main Market - Premium FTSE ICB sector Oil & Gas Producers Main countries of operation Pan Africa Admission date 04 May 2018 Money raised at admission $819.3 million Market cap at admission $2.7 billion Current market cap $2.0 billion Bookrunners JP Morgan, Citi, Credit Suisse, BNP Paribas, Rand Merchant & Standard “We have been extremely pleased with the investor response to our offer, in what has been a challenging period for the wider markets. Vivo Energy’s differentiated business model, strong track record, exposure to Africa and the growth opportunity it represents has been well understood by investors. We are excited about the momentum in the business and are looking forward to delivering further growth and success as a London listed company.” Christian Chammas, Chief Executive Officer of Vivo Energy Listing Story Vivo Energy distributes and markets Shell-branded fuels and lubricants to retail and commercial customers in Africa. The Group has a network of over 1,800 service stations in 15 countries and exports lubricants to a number of other African countries. It is also the first company identified in LSEG’s ‘Companies to Inspire Africa’ report. Vivo chose a listing on LSE amidst pulled IPOs from Varo in Amsterdam citing European market volatility. Vivo successfully raised $819 million via IPO on the Premium Main Market, valuing the company at $2.7 billion at the time. This was followed by an inward listing of shares on JSE. As at H1 2018, Vivo was the second largest IPO on London Stock Exchange; and the largest Africa-focused IPO in more than a decade. Source: LSE, company website, Dealogic, FactSet, October 2019 Vivo Energy Top 5 Institutional Investors (value held $m) The Capital Group Cos., Inc. Brandes Worldwide Holdings LP FIL Ltd. BlackRock, Inc. Legal & General Group Plc 97.0 51.9 34.1 31.4 24.1
  43. 43. 43 Case Study Grit "We are delighted to have successfully completed our Listing on London Stock Exchange and we are proud to be the first London listed pan-African real estate group. We welcome our new shareholders and look forward to embarking on the next phase of our development as we seek to take advantage of the further opportunities for real estate investment assets in pre-selected African counties and beyond” Bronwyn Corbett, CEO, Grit Top 5 Institutional Investors (value held $m) Government of South Africa M&G Plc Legal & General Group Plc Grindrod Ltd. Ruffer Management Ltd. 83.0 11.3 10.4 10.4 7.1 Listing Story Grit is focused on real estate investment assets underpinned by long-term leases with high quality tenants delivering strong and sustainable income. Their portfolio currently comprises of over 20 income producing properties in seven African countries. The IPO is intended to create a compelling opportunity for UK and other equity investors to gain exposure to the African real estate sector. The listing will support Grit's aim to grow their portfolio and become the leading real estate owner in Africa. Grit raised $132.1 million (€113.3m) in the Standard Main Market by issuing 92.4 million shares at a price of $1.43 per share. Grit's strategy is to grow their portfolio based on hard currency LT leases and strong counterparties, focus on areas with existing / pending REIT structures, and to develop and maintain partnerships in countries that will secure pipeline and strengthen in-country resources. Company name Grit Real Estate Income Group LSE market Main Market – Standard FTSE ICB sector Real Estate Investment & Services Main region of operation Africa Admission date 31 July 2018 Money raised at admission $132.1 million Market cap at admission $393.3 million Current market cap $329.8 million Bookrunners finnCAp, Northland, Exotix, PSG, PC, Axys Source: LSE, company website, Dealogic, FactSet, October 2019 Price performance rebased to 100 as at date of admission
  44. 44. 44 Case Study ASA International “The completion of the IPO on the premium segment of the London Stock Exchange is a landmark moment for ASA International. We look ahead with confidence as we seek to deliver value for our shareholders and continue to expand our mission to enhance financial inclusion among predominantly female micro- entrepreneurs across Asia and Africa.“ Dirk Brouwer, co-founder and CEO, ASA International Top 5 Institutional Investors (value held $m) Ruane, Cunniff & Goldfarb, Inc. Deccan Value Investors LP Wasatch Advisors, Inc. Standard Life Aberdeen Plc Bank of Montreal 56.8 39.3 11.2 8.8 7.9 Listing Story ASA is the world’s largest and most profitable international micro finance institution aiming towards enhancing the empowerment of financially undeserved female micro-entrepreneurs and small business owners in a socially responsible manner. Following securing a $20 million investment from the Bill and Melinda Gates Foundation and another $20 million loan, ASA chose to list in the LSE for the group’s development and to gain access to capital markets further improving their profile in the eyes of management and employees. The company listed on the Premium Main Market, raising a £137.7 million ($181.9 million) issuing 44m shares at £3.13/share, giving it a total market capitalization of $413.5 million at IPO. IPO proceeds would be used to deliver value to the shareholders by continuing to grow its client base, seeking to serve the market of 365 million low-income women, and expanding into new geographies. Company name ASA International Group PLC LSE market Main Market – Premium FTSE ICB sector Financial Services Main regions of operation Africa and Asia Admission date 13 July 2018 Money raised at admission $181.9 million Market cap at admission $413.5 million Current market cap $397.4 million Bookrunners Citigroup, EFG, Investec Source: LSE, company website, Dealogic, FactSet, October 2019 Price performance rebased to 100 as at date of admission
  45. 45. 45 Case Study Source: LSE, company website, Dealogic, FactSet, October 2019 Price performance rebased to 100 as at date of admission RA International “Admission to AIM will provide an appropriate structure for the long-term development of the business and enable us to progress our capabilities to benefit our customers further. The support that we’ve seen from the London market has been very encouraging and we are very pleased to welcome new shareholders to our business.“ Soraya Narfeldt, CEO, RA International Top Institutional Investors (value held $m) Jupiter Fund Management Plc BlackRock, Inc. Premier Asset Management Group Plc 4.5 4.2 0.8 Listing Story RA International is Africa’s leading remote site service provider offering integrated camp services with a presence in more than 10 African countries. The business is headquartered in Dubai and has 14 years of operational knowledge with a culturally diverse and multi-lingual workforce of over 1,600 people. RA raised ₤18.8 million ($24.6 million) by issuing 33.6 million shares at ₤0.56 ($0.73), at a market capitalisation of $127.2 million at IPO. The new funds raised through the IPO will be used to further accelerate the growth of RA and its international expansion plans. Company name RA International Group PLC LSE market AIM FTSE ICB sector Industrial Goods and Services Main countries of operation Somalia, South Sudan, Mozambique Admission date 29 June 2018 Money raised at admission $24.6 million Market cap at admission $127.2 million Current market cap $86.1 million Nomad Cenkos Securities
  46. 46. 46 Case Study Company name Kropz Plc LSE market AIM FTSE ICB sector General Mining Main countries of operation South Africa, Republic of Congo, Ghana Admission date 30 November 2018 Money raised at admission $34.99 million Market cap at admission $122.97 million Current market cap $32.9 million Nomad Grant Thornton “We are pleased to have raised gross proceeds of £27.3 million despite the recent volatility across the global stock markets. I would like to thank Africa Rainbow Capital who have continued to invest in the business and the new UK, South African and international shareholders for their support…..” Ian Harebottle, Chief Executive Officer Listing Story Kropz is an emerging plant nutrient producer with an advanced stage phosphate mining project in South Africa; Elandsfontein Phosphate Project and exploration assets in West Africa. To raise funds required to complete the Elandsfontein Phosphate Project and to further develop its West African assets, the company admitted to LSE’s AIM market on 30th November, 2018. The Company raised $35 million (£27.3 million) at IPO via a placing of 68.4 million new Ordinary Shares. Post Admission, Kropz acquired 71.3% of Cominco who, through its wholly owned subsidiary, Cominco SA, owns the Hinda Phosphate Project; the Company’s medium-term development asset Project in the Republic of Congo. Source: LSE, company website, Dealogic, FactSet, October 2019 Kropz 0 10 20 30 Use of Proceeds ($ million) Elandsfontein final development capital Project development and operating costs Elandsfontein debt reduction Admission Expenses
  47. 47. 47 “We publish this report as it is our belief that these firms, and high-growth firms like them, are crucial to the future of the African economy.” David Schwimmer, CEO, London Stock Exchange Group Profiling Africa’s Inspiring Companies On 15 January 2019, LSEG launched the second edition of the pioneering Companies to Inspire Africa report, which featured 360 private, high-growth companies from 32 countries across Africa, operating in 7 major sectors. This follows on from the launch of the inaugural Companies to Inspire Africa 2017 report. CTIA aims to reduces the information gap between Africa’s fastest growing companies and global investors, as well as showcase to the world some of the exciting business changes happening across Africa. Companies to Inspire Africa (CTIA) Showcasing Africa’s exciting, high-growth companies
  48. 48. 48 32 97 in Nigeria 66 in Kenya 31 in Uganda 23 in South Africa 20 in Ghana 15 in Ethiopia 14 in Rwanda Countries in Africa 7 23% Consumer Services 21% Industry 14% Agriculture 14% Tech & Telecoms 12% Financial Services 9% Healthcare & Education 6% Renewable Energy Main sectors 360 46% Revenue CAGR over three years 23% Female CEOs, up from 12% in CTIA 2017 75 Companies repeating from CTIA 2017 363 Average number of employees Companies identified Geographical Spread The Statistics – 2019 CTIA Impressive breadth and diversity of African business
  49. 49. London vs US Considerations
  50. 50. 50 19% 45% 3% 13% 30% 5% - 50 100 150 200 250 0 5 10 15 20 25 30 35 40 45 50 LSE AIM LSE Main Market NASDAQ NYSE UK US No.ofIPOs Post-IPOperformance(avg%) Average % change offer/current price No. of IPOs Source: Dealogic, LSE calculations, August 2019 Small cap defined as companies with market cap of up to $250m at the time of IPO Post-IPO Performance defined as avg % change of current price in relation to IPO offer price ⎯ In recent years, smaller companies have found LSE’s markets to be a superior location for performance following their IPO Strong Support for Small Caps Small-cap IPOs and aftermarket performance (2016 – 2019 H1)
  51. 51. 51 FINRA TRF 20% NASDAQ 16% Dark Pools 15% NYSE 13% Arca 11% DirectEdgeX 7% BATS 7% Other Exchanges 11% U.S. Market Split by Venue, 20152 Comparing Trading Liquidity US markets see higher level of fragmentation and proportion of HFT LSE Group 68% Bats Europe 30% Other 2% U.K. Market Split by Venue, 2015 1 LSE Group NYSE Group Total # Trade -1y 145m trades 218m trades Avg trade size 785 shares/trade 214 shares/trade “Markets today are fragmented across 11 exchanges and over 60 electronic crossing networks and Alternative Trading Systems (ATS). No single trading venue or exchange accounting for more than 20% of total market volume.” The majority of turnover in LSE listed stocks match on LSEG. LSE Group accounts for more than two third of trading. LSE Group, therefore, has a comprehensive view of trading activity of stocks listed on LSE. Fragmentation adds to cost and complexity. “Given that custodians charge by trade, fragmentation and execution through multiple brokers has had cost implications for institutional investors”3 0 10 20 30 40 50 60 70 80 New York London % of HFT in Trading1 1Source: Fidessa, Jan 2017, The Brattle Group and CS Trading Strategies report. FTSE 100 trading split by venue owner, Jan 2017 2 Credit Suisse Trading Strategy 3The Impact of Equity Market Fragmentation and Dark Pools on Trading and Alpha generation
  52. 52. 52 — From 2016-18, the performance of international companies listed in the US has been considerably worse than that of domestic companies — While the FTSE 100 and S&P 500 exhibit very similar levels of volatility, international stocks (none of which are included in the S&P 500) exhibit far greater volatility — For companies that derive the greatest proportion of their revenue in the UK, this jumps up to 13.5% The US: a Domestic Focused Market International companies exhibit more volatility in the US International Companies tend to significantly underperform domestic companies post-IPO in the US Source: Dealogic, FactSet, January 2019 Post-IPO performance is a weighted average by market cap at the time of IPO Note: Volatility is defined as the standard deviation of price changes over the last 3 years -50 -40 -30 -20 -10 0 10 20 30 40 50 2016 2017 2018 PostIPOPerformance(%) Domestic International Volatility comparison between FTSE 100, S&P 500 and International NYSE-listed stocks 7.03 7.05 12.50 13.52 0 2 4 6 8 10 12 14 FTSE 100 S&P 500 International NYSE-listed UK NYSE- listed Volatility(%)
  53. 53. 53 Source: FactSet, Bloomberg, January 2019 *Underweight/Overweight is determined based on the overall weighted % of all international stocks listed in US (8.5%). International companies are those where the country of primary business of a company is not equal to the country of its primary listing. Country of primary business methodology uses FactSet data and takes into account the country of largest revenue exposure, headquarters and incorporation Comparison of Top 5 US and non-US Institutional Investors in Domestic and International US-listed Companies Top US Institutional Investors % Held in Int’l Companies Underweight / Overweight* International Stocks BlackRock 3.4% Underweight The Capital Group 5.8% Underweight FMR 6.4% Underweight T. Rowe Price 7.2% Underweight Invesco 5.9% Underweight Top non-US Institutional Investors % Held in Int’l Companies Underweight / Overweight International Stocks UBS 3.1% Underweight Government of Norway 4.7% Underweight Janus Henderson 8.2% Underweight AXA 3.5% Underweight Sun Life Financial 8.0% Underweight US Investor Weightings Overview Largest investors typically underweight international stocks — The total market capitalisation of international stocks on NYSE is 8.5%. Top US investors are ‘underweight’ international holdings — Additionally, even non-US investors are underweight non-US companies in NYSE — The domestic-focused nature of US investors often leads international companies to be valued at a discount to their domestic peers 2.9x 14.7x 2.3x 13.0x 0 2 4 6 8 10 12 14 16 Price / Sales EV / EBITDA Domestic International Comparison of relative valuations of domestic and international NYSE-listed companies
  54. 54. 54 3.8% 6.5% 5.7% 3.5% 6.4% 5.8% 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 LSE NASDAQ-US NYSE Underwritingfee% 2017 2018 Comparison of Underwriting Costs for IPOs (%) UK vs US IPO Cost Comparison UK typically lower cost with less litigation risk Source: Dealogic, January 2019 Source: 202 Foreign issuers were sued from 2014-18, paying out settlements totalling $4.5bn 8.4% of all US exchange listed companies were sued in 2018 alone No SarbOx Lower Insurance Less Litigation
  55. 55. 55 Source: Stanford Law School in collaboration with Cornerstone Research, Research-Securities-Class-Action-Filings-2017-YIR.pdf *DDL- The total decline—that is, the dollar value change—in the market capitalisation of a defendant company from the trading day immediately preceding the end of the class period to the trading day immediately following the end of the class period. Mega DDL filings have a dollar loss of at least $5 billion. **Source: SEC Website Comparison of US and UK Regulatory Regimes Key Issue United States United Kingdom Quarterly Reporting Liability regime arising from disclosure Sarbanes Oxley introduces a risk of personal criminal liability for CEO and CFO who must sign-off on disclosure, financial and accounting controls and disclosure in SEC filed annual report. Directors responsible for content of annual report, would not incur personal criminal liability except in cases of fraud. Directors and Officers Insurance D&O Insurance costs are typically 3x more expensive for a company listed in the US due to the significantly more litigious environment compared to the UK. Owing to the less litigious environment, D&O Insurance is generally far cheaper in the UK than the US Litigation ⎯ Plaintiffs filled a record 412 new federal class action securities cases in 2017 ⎯ This is 52% higher than 2016 and more than 2x than 1997-2016 average ⎯ Snap Inc (NYSE.SNAP) was subject to class action filing 2 months after listing. ⎯ In January 2018, Brazilian oil company Petrobras agreed to pay $3bn as settlement to a class action lawsuit We were not able to identify a class action in the UK against any LSE listed foreign company. This compares to 336 class actions against foreign US listed companies since 2008. 0 1000 2000 3000 US Corporate Foreign Corporate USDm FCPA 2016 Settlements against US vs Int’l firms** Market Cap loss that preceded class action (Direct Dollar Loss* by size Average (1997-2015)) 54% 11% 8% 10% 8% 6% 3% Mega ≤$500M ≤$1B ≤$2B ≤$3B ≤$4B ≤$5B
  56. 56. 56 US Litigation Environment Class Action lawsuits are increasing in frequency Source: — Plaintiffs filed 403 new federal securities class actions last year, making 2018 the second-largest year on record, trailing only 2017 — The number of filings in 2018 was 99% higher than the average — Core filings – those excluding M&A filings – were the highest since 2008m when filings surged due to the volatility in global financial markets — Since 2009, 19.5% of IPOs have been subject to a federal core filing within four years of IPO, compared to 14.5% pre-crisis 228 182 120 177 223 165 175 188 151 165 168 207 271 412 403 0 50 100 150 200 250 300 350 400 450 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 M&A Filings ICO / Cryptocurrency Filings Chinese Reverse Merger Filings Credit Crisis Filings All Other Filings
  57. 57. 57 4.7% 15.2% 1.4% 12.5% 26.3% 19.4% 19.4% 6.5% 0% 5% 10% 15% 20% 25% 30% Consumer Discretionary Consumer Staples Energy / Materials Financials / Real Estate Health Care Industrials Tech / Telecomms Utilities %marketcapsubjecttocorefilings —The likelihood of an S&P 500 company being sued in 2018 was the highest since 2002 —This constitutes 14.9% of the S&P 500’s total market cap —Of the companies in the index at the beginning of 2018, approximately 1 in 11 (9.4%) was a defendant in a core filing during the year —Core filings activity in the Tech / Telecomms sector increased for the fourth consecutive year —Nearly 20% of the market cap of the Tech / Telecomms sector was subject to core filings in 2018 US Litigation Environment Core filings in Tech / Telecomms sector increase again Source: Note: sectors are based on the Global Industry Classification Standard (GICS)
  58. 58. Appendix Listing Rules in London
  59. 59. 59 MAIN MARKET AIM Description Premium Sovereign Segment Standard (shares) High Growth Segment Standard (DRs) AIM Domicile Any Any UK / Europe Any Any Regulation EU Regulated Market & Listed EU Regulated Market & Listed EU Regulated Market EU Regulated Market & Listed MTF (EU SME Growth Market) Minimum free float 25% (shares) 25% (shares or DRs) 25% (shares) 10% 25% of the DRs Assessment of appropriateness Revenue criteria 75% of business supported by historic financial information (3 years) n/a Historic revenue growth of 20% CAGR (3 years) n/a n/a Admission Prospectus & Eligibility letter to UKLA under Listing Rules Prospectus & Eligibility letter to UKLA under Listing Rules Prospectus & Eligibility letter to LSE Prospectus & Eligibility letter to UKLA under Listing Rules AIM Admission Document & Nomad declaration Adviser Listing Sponsor at admission & for transactions n/a Key Adviser n/a Nominated Adviser at all times Corporate governance UK Corporate Governance Code DTR statement DTR statement DTR statement Code of issuer’s choosing Significant transactions Percentage ratios as per Listing Rules (LR10) n/a Percentage ratios as per HGS Rules n/a Class tests as per AIM rules Controlling shareholder agreement Required (LR6.5) Sovereign controlling shareholder exempt n/a n/a n/a Considered with Nomad Related Party Transactions Notified via RIS* Independent shareholder vote** Sponsor opinion Annual accounts Notified via RIS* Interim mgmt. statement (EEA shares) Annual accounts DTR interim mgmt. statement Disclosed via annual accounts Notified via RIS – percentage ratios* Annual accounts Annual accounts Notified via RIS Nomad fair and reasonable Annual accounts Cancellation 75% shareholder approval No shareholder approval required 75% shareholder approval No shareholder approval required 75% shareholder approval Indices FTSE UK Series, where eligible Ineligible for FTSE UK series Ineligible for FTSE UK series Ineligible for FTSE UK series Relevant IOB index FTSE AIM Series, where eligible Choice of Routes to Market Choice of Routes to Market – Regulatory Overview *Does not apply to ordinary course transactions. See LR11 for more details / B4 of schedule 5 of A&Ds (HGS). **Size thresholds and other exemptions apply. See LR11 for more details.
  60. 60. 60 Key eligibility requirements Key continuing obligations Listing Rules • Compliance with the Listing Principles (LR 7) • Appointment of a sponsor • 75% of the business to be supported by a historical financial information • Control over the majority of the entity’s assets • Independent business as main activity • Unqualified working capital statement • Minimum 25% shares in public hands • Minimum market capitalisation GBP 700,000 • Free transferability of securities • Eligible for electronic settlement Accounts • 3 years of audited financial information* • Latest accounts no more then 6 months old (Interims included if accounts more than 6 months old)* • EU IFRS or equivalent Corporate Governance • UK Corporate Governance Prospectus • Prospectus approved by the UKLA Admission & Disclosure Standards • Compliance with London Stock Exchange's Admission and Disclosure Standards *Does not apply to mineral or scientific research companies Periodic Reporting • Annual Financial Report (four months after the end financial period) • Half yearly financial report • Significant transactions (class tests) Listing Rules • Pre-emption rights extended to existing shareholders • Reverse Takeover Rules Disclosure and Transparency Rules • Inside information made public without delay • List of insiders • Major shareholder notification • Directors Dealings • Related party transactions Corporate governance • UK Corporate governance – comply or explain • Statement in the annual report Sponsor • To be retained at all times Choice of Routes to Market Premium Listing on the Main Market
  61. 61. 61 FTSE UK Index Series FTSE All share Index FTSE All-small Index FTSE 100 FTSE 250 FTSE 350 FTSE All Sector Index FTSE Small Cap Index Passive and active funds in London 0% 20% 40% 60% 80% 100% Active Passive Source: Investment Management Association’s 10th Asset Management Survey Choice of Routes to Market Premium Listing – FTSE Index Inclusion ― FTSE UK series is one of the world’s most widely tracked family of indices ― FTSE UK Series is the only flagship index series of any major exchange to admit international companies ― Premium Listing on London Stock Exchange enables issuers to get access to tracker funds
  62. 62. 62 *Each company inclusion into FTSE UK Series is individually assessed by the FTSE practitioners committees. Eligibility is dependent on the company passing liquidity screening. The calculation of the minimum free float will be based on the ordinary share capital issued by the company and may include shares that would otherwise be excluded solely because they are subject to a lock-in clause of twelve months or less from their first day of trading, but that would in all other respects be considered part of a company’s free float. **Examples of low taxation countries include: BVI, Bermuda, Cayman Islands, Guernsey, Isle of Man, Jersey, Marshall Islands. Premium Listing on Main Market of London Stock Exchange Not eligible Yes No Incorporation? UK Overseas Incorporated in FTSE developed country? Yes No Free float >50% at admission? Incorporated in low taxation jurisdiction as approved by FTSE?** Yes No Adherence to principles of UK Takeover code Not eligible Yes No Not eligible Potentially eligible (if free float>25%)* Yes No Potentially eligible* Not eligible Choice of Routes to Market FTSE UK Index Series Decision Tree
  63. 63. 63 Listing Rules • Minimum 25% shares in public hands in one or more EEA States • Minimum market capitalisation GBP 700,000 • Free transferability of securities • Eligible for electronic settlement • 12 month working capital statement Accounts • 3 years of audited financial information (or such shorter period that the issuer has been in operation) • Latest accounts no more than 18 months old (if audited interims included) or 15 months old (if unaudited interims included). If accounts are older than 9 months, interims must be included. • EU IFRS or equivalent Corporate Governance • Domestic corporate governance code applies Prospectus • Prospectus approved by the UKLA Admission & Disclosure Standards • Compliance with London Stock Exchange's Admission and Disclosure Standards Periodic Reporting • Annual Report (four months after the end financial period) • Half yearly financial report Disclosure and Transparency Rules • List of insiders • Inside information made public without delay • Reverse Takeover Rules Corporate governance • Domestic Corporate governance applied • Corporate governance statement in the annual report Key eligibility requirements Key continuing obligations Choice of Routes to Market Standard Listing of Shares on the Main Market
  64. 64. 64 Key eligibility requirements Rulebooks • High Growth Segment Rulebook • Admission & Disclosure Standards • Prospectus Rules Eligibility criteria • Incorporated in an EEA state • Free float: Min 10% shares in public hands at admission, with a value of ≥£30m (majority of £30m to be raised at admission) • Growth: 20% CAGR in revenue for historic 3 year period • Appointment of Key Adviser Admission documents • Prospectus approved by UKLA/ home competent authority • Eligibility letter confirm compliance with entry criteria prescribed in HGS rulebook Financial information As per Prospectus directive: • 3 years (or shorter) of audited financial information, with latest accounts no more than 18 months old & interims to be included as appropriate • EU IFRS or equivalent Corporate governance • Statement on what corporate governance code has been adopted, to what extent, and explanation of any non-compliance Key continuing obligations Ongoing requirements are those set out in the Disclosure & Transparency Rules, with additional requirements around significant transactions set out in the HGS Rulebook Periodic Reporting • Annual Report (four months after the end financial period) • Half yearly financial report • Interim Management Statement Event Driven reporting • Inside information made public without delay • List of insiders • Major shareholder notification • Directors’ dealings notification Corporate governance • Statement in the annual report on what corporate governance has been adopted, to what extent, and explanation of any non-compliance Adviser • To consult with Key Adviser on specific events (e.g. notifiable transactions / cancellation) • No obligation to retain Key Adviser at all times Main Market High Growth Segment
  65. 65. 65 Key eligibility requirements Eligibility criteria • Appointment of Nominated Adviser • No minimum track record requirement or free float criteria, but company must demonstrate appropriateness to join a public market Admission documents • Pre-admission announcement at least 10 business days prior to admission • AIM admission document • Nomad declaration of appropriateness Rulebooks • AIM Rules for Companies and Nominated Advisers Corporate governance • Adoption of corporate governance measures as appropriate for the business • UK Corporate Governance Code / QCA Corporate Governance Code as best practice Continuing obligations Adviser • Retain a nominated adviser at all times, failure to do so may result in suspension in the company’s shares Periodic reporting • Audited Annual Report • Half yearly financial report Disclosure requirements • Price sensitive information to be made public without delay • Significant shareholder notification • Directors’ dealings notification • Company website with up-to-date regulatory information Corporate transactions • Class tests to assess transactions • Notification of substantial transactions, related party transactions • Shareholder approval for reverse takeovers, fundamental disposals & cancellation Choice of Routes to Market AIM
  66. 66. Gokul Mani Head of Middle East, Africa and India Primary Markets +971 (0) 50 873 0699 Tom Attenborough Head of International Business Development Primary Markets +44 (0) 20 7797 3747 Rugiyya Gahramanli Analyst, Primary Markets +44 20 7797 4660