400bn available for smaller companies on the UK Stock Markets

  • Added:
    May 16, 2013
  • Article Views:
  • Word Count:
Photo by Tax Credits

It’s a little known fact that in 2012, the FTSE Small Cap Index outperformed most other indices in the UK with a rise of over 20 per cent.

Although over recent years many institutional investors have favored larger companies, there remains a tranche of ‘street wise’ investors that have continued to support many of the UK’s smaller PLC’s, and in so doing, have seen the value of their portfolio’s soar.

Amongst stock market investors the traditional perception was that smaller listed companies were riskier investments than larger companies. In certain circumstances this may have been the case, however for savvy investors, smaller companies offer considerable capital growth as part of a longer term portfolio, particularly for those taking a longer term investment view.

A relatively new trend is for smaller company PLC’s to form links directly with Retail Stockbrokers and Private Client Fund Managers rather than targeting Institutional investors as was the case in previous years. Perhaps it’s unsurprising that smaller PLC’s are taking this route, as the combined funds managed by them is in excess of £400bn.

The majority of firms have multiple portfolios under management, and are therefore able to invest in the shares in smaller and more frequent tranches. The key barrier to these firms investing in smaller company PLC’s has always been the issue of risk.

But now a growing band of smaller company PLC’s are now becoming proactive with their investor relations strategies. Many have also stepped up their PR activities through the business and financial press and via social media channels to target this important investor sector. From a company’s perspective, these investments can have a positive impact on liquidity and help to support the share price.

Having investors that can purchase these small bundles of shares is crucial to ensuring a share price that more accurately reflects a company’s fair value. This improves the marketability and liquidity of the company and helps to fill the void between institutions and private investors.

As the value of smaller cap indices continues to rise, Private Client Stockbrokers and Private Client Fund Managers are increasingly looking to UK smaller company PLC’s, thus helping to support the growth of these companies. This appears to be a win-win situation with the investors achieving the growth they require from their investments and smaller PLC’s receiving a welcome boost.

To find out more or for information on floating a company within the many stock markets available it is advisable to seek advice from one of the flotation consultants available online.

Author's Profile

John Holland was the former head of the UK regional operation at the London Stock Exchange, with responsibility for both AIM and The Main Market. He has been advising companies since 1995 about stock market flotation and is a regular author of company finance and stock market publications and articles in business and financial press as well as various institutions on the internet.

Please Rate this Article
Poor Excellent