‘You adapt quickly in a disaster’: FinnCap boss Sam Smith on the broker’s strong year
Stockbroker FinnCap has enjoyed an unexpectedly strong year as capital markets started to rebound and business confidence triggered a flurry of IPOs in London.
Chief executive and founder Sam Smith spoke to City A.M. about how she steered the ship and what lies ahead for the IPO market this year.
Initial panic
The AIM specialist recently announced total revenue for the year is expected to come in at £47.3m, 83 per cent higher than the prior year after an unexpectedly strong performance.
It has overseen further equity fundraisings, private M&A transactions and four IPOs but it did not come without its initial difficulties.
“We were hunkering down for a very difficult period, a bit like the general financial crisis,” Smith said. “For two weeks it was a real rollercoaster. If the furlough money hadn’t come in we probably would have had to make redundancies, you just didn’t know what was going to happen.” FinnCap has since paid back all of the money used to pay staff on furlough.
“Now it seems normal to do an IPO remotely but then we thought: Are investors going to back companies they’ve never met? Are they going to rely on a document or presentation?’ But they did”, Smith says. “When you’re in a disaster scenario people adapt very quickly… institutions just got used to doing things via Zoom.”
Even once the market started to return to normal levels Smith was cautious there could be another crisis.
“Every month that went past we were thinking ‘Q2 can’t be this strong surely’ and I think we were prepared for that merry go round to stop at some point and it didn’t, it just kept going” Smith says.
Life sciences sector boosts performance
FinnCap’s performance in the second half of the year was even stronger in large part because of the rapid rebound in markets globally. Pent up demand pushed dealmaking to new levels with the number of IPOs also soaring.
The stockbroker oversaw the listing of Elixirr but its main focus has been on its work within the life sciences sector.
The UK life science industry has come into its own in the last year and has been one of the few winners amid the pandemic. Last year marked the best year for biotech investments ever recorded with investment set to grow further in 2021.
FinnCap is one of the leading advisers of the sector in the AIM market and its analysts have said the market is yet to peak and will remain strong into 2022 and beyond.
“Life sciences has been a very quiet sector. It’s been a tricky sector but suddenly you see life sciences come into focus,” Smith said. “We were suddenly in the sweet spot of there being money available… and life sciences companies are the ones they want to back because they’re the ones people want to back.”
IPO pipeline
So what next for markets this year? No doubt the successful vaccine rollout has helped boost confidence which has trickled into a strong pipeline of IPOs.
However there have been some high-profile flops including Deliveroo, which had been touted as one of the biggest floats in the City this year. Its share price plummeted on its market debut and has been unable to pick up interest since.
Does the Deliveroo disaster mean London is destined for failure? For Smith it was a Deliveroo issue rather than a market problem. “Deliveroo had a very big valuation and much more than its peers group. That’s unusual… I think it’s for the advisers to price things properly,” Smith says.
“We’re pretty confident this year about getting IPOs away for quality businesses. There’s always money for good companies so it’s about pricing and valuation and where the markets impact things.”