Drug discovery firm C4X Discovery Holdings is set to de-list from London Stock Exchange sub-market AIM and to re-register as a private company before appointing Asset Match Private Market as a secondary trading facility. The firm’s pivot to a private market comes amid a wider drought in primary market listings and reflects an increasing interest in private markets.
C4X cited the recent downturn in financial markets for its decision to de-list, which it claims has put a dent in the company’s share price and its ability to raise funds. The move is the latest in a string of delistings from AIM, including high-tech bank Tintra in November 2023, Israel-based cybersecurity firm Brandshield Systems in September, and construction company Fulcrum Utility Services in August.
Dissatisfaction
Clive Dix, CEO of C4X Discovery, said: “Despite delivering on our strategy including three major deals with leading pharmaceutical companies demonstrating our scientific expertise and deal making capabilities, the recent downturn in the financial markets has adversely impacted our share price, and with it, our future ability to raise funds in the public markets.”
“The board believes the current public market valuation does not reflect the underlying potential of our business or our achievements to date and that this is unlikely to change in the short-to-medium term. We believe that we can potentially access a larger quantum of future funding required to accelerate our strategy as a private company and therefore we believe that a cancellation of the company’s admission on AIM is in the best interest for shareholders and for the future of our business as a whole,” Dix added.
C4X intends to implement a Matched Bargain Facility with Asset Match, facilitating trading in its ordinary shares by matching buyers and sellers through periodic auctions.
Asset Match operates an open auction system where volumes of bids and offers at different prices are displayed on its website together with the closing date of the auction. At the end of each auction period, Asset Match passes this information through an algorithm that determines a “market-derived” share price based on supply and demand and allocates transactions accordingly.
Asset Match business development director Ben Weaver told BEST EXECUTION the firm works with a number of companies, similar to C4X, that have opted to call time on their public market quote.
“Typically, the latter occurs because companies and their boards can no longer see the benefits or justify staying public, taking into account a lack of liquidity, the costs associated with being quoted, the management time being consumed maintaining it and so on. By stepping off exchange the [C4X] board feel it will allow them to access a new and potentially larger pool of funding whilst not being hamstrung by an underperforming share price.”
Weaver told BEST EXECUTION C4X can expect a number of benefits in putting in place a facility with Asset Match and operating out of the glare of the public markets. “One of which is that it is a cost effective and efficient way of providing a mechanism for shareholders to be able to value and continue to physically buy/sell these shares. The shares are maintained within CREST which allows lots of brokers we work with to place orders, deal and settle these transactions. Shares will only transact at pre-determined intervals, not only corralling liquidity into set trading windows/auctions but affording the company more flexibility with how frequently these occur. Shareholder and company updates will continue to be published and will be accessible on our platform as well as the company’s website.”
Private markets push
EY notes that there were reportedly only 10 listings on AIM last year, amid a wider primary markets drought. Over the past year (to 27 March 2024) AIM lost 11.26% of its value while the FTSE 100 was up 5.91% over the same period. AIM is a sub-market of the London Stock Exchange that was launched on 19 June 1995 as a replacement to the previous Unlisted Securities Market that had been in operation since 1980.
The move by C4X aligns with increased interest in private markets, seen by some as a solution to the current capital markets squeeze in the UK (and across Europe) that has seen initial public offerings (IPOs) dwindle and listings (and liquidity) flee to the US. Earlier this year LSEG announced plans to launch its own private markets platform under the Private Intermittent Securities and Capital Exchange System (PISCES) legislation announced in the Autumn Budget. Developed by the London Stock Exchange Group (LSEG), PISCES would allow private companies to trade their securities in a controlled environment and on an intermittent basis.
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Jersey-based The International Stock Exchange (TISE) launched its own private markets platform 18 months ago which this year contributed to record figures for the exchange. In the 2023 financial year TISE saw a £10.8 million turnover, an increase of 6.5% on the previous year, and £4.9 million in profits, an 18.1% increase YoY. The company also recorded 842 new listings – contributing to overall public market growth of 6% YoY.
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Challenger exchange Aquis has also set itself up as a rival to AIM and has seen consistently increasing revenues for the past few years. The Aquis Growth Market aims to encourage smaller listings through lower fees and easier entry requirements (unlike AIM, which requires the appointment of a nominated advisor/NOMAD and a broker), although it does currently have a notable smaller market cap than its larger peer. In 2023 the exchange admitted 16 new companies – the most of any growth exchange in the UK for the second year running, according to CEO Alasdair Haynes.
Proceed with caution
C4X is currently seeking shareholder approval for the move, a decision for which will be made on 15 April 2024. If passed, it is expected that the cancellation will come into effect on 26 April 2024. The last day of dealings on AIM is expected to be 25 April 2024.
AIM has a historic precedent for mass delisitings. In 2009, a wave of companies delisted from AIM after a handful of high-profile family-owned departures including Metnor Group and GSH Group, which took advantage of the 75% shareholder majority required to delist to push through buy-backs. At the time Andy Brough, head of the Schroders small and mid-cap team, told the Financial Times: “This is the beginning of the end for the AIM market. AIM will be virtually uninvestable for people like Schroders if companies are going to behave like this.”
Having survived that event, the increased interest in investment in private markets – including big firms such as Schroders, may draw parallels for watchers of the SME sector. With greater pressure on revenues for firms of this size, the risk is clearly increasing.
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