Globacap CEO and founder Myles Milston has issued a statement hammering London’s smaller cap exchange, AIM [Alternative Investment Market]. AIM was set up to assist smaller firms in listing shares.
Recently, the UK Financial Conduct Authority (FCA) posted new rules designed to boost public listings in the UK. The update follows the Kalifa Review which provided guidance as to how the UK could maintain and increase its importance as a global financial services center and Fintech hub. The Review advised policymakers to improve the share listing environment in the UK – going so far as to suggest that tokenized securities should be pursued. At that time, Paul Marshall, Chairman of Marshall Wace, described the UK stock market as a “global backwater,” declaring, “London is becoming the Jurassic Park of stock exchanges.”
Globacap is a firm that seeks to improve capital markets by utilizing digital workflows to automate private markets and make them more efficient.
While noting that AIM quoted firms are at a 22 low – with 80 firms leaving in the past year, Milston said the AIM market is “no longer fit for purpose due to a lack of liquidity and funding.” He criticized the low trading volumes and erratic share price movements.
“UK corporates that traditionally would have tapped the likes of AIM for vital liquidity are now assessing their options, and many are turning towards private markets. Over the past year, we have seen countless examples of corporates de-listing, being bought out by private firms or raising funds through private markets,” said Milston. “Large institutional investors are significantly increasing their private markets exposure.”
Milston said that Calpers, one of the largest pension funds in the world has announced its intent to boost its private markets allocation to 40%. This represents billions of dollars moving into private securities.
Milston said that technology can mitigate traditional obstacles regarding private markets. Largely due to cost and compliance demands, companies are seeking to remain private for longer, but private markets can provide a liquidity path.
“The UK government is already making moves in this space with the introduction of PISCES. It will enable private companies to access the funding and liquidity they need while avoiding the complexity and expense of going public. PISCES will certainly boost the UK’s capital markets, although not in the way the government hopes. Greater access to liquidity will support private firms in scaling up and growing while helping investors realise their gains sooner, as it will be easier for them to find buyers for their shares.”
Even with regulatory tweaks and improved technology, the burden of a public listing is a significant deterrent, said Milson. He predicts that PISCES will not deliver a solid pipeline of IPOs as anticipated.
“If deployed in the right way, PISCES could be a catalyst for the UK’s private markets ecosystem and wider economy,” said Milston, without providing additional detail.
The challenge is the balance between investor protection and access to capital and liquidity. Regulators tend to lean into more regulation to protect individuals which can inevitably stifle innovation and undermine opportunity.
