A major challenge for the finance director of any small cap company is
winning the attention of institutional investors. Not an easy task when
companies are listing on AIM at a rate of more than 1,000 a year and there
aren’t enough analysts around to tell your company’s story.
A new investment research boutique is attempting to fill that gap. Edison
Investment Research provides commissioned research notes for companies in the
small to mid-cap sector that need analyst coverage to get their message out to
the market. The company covers more than 100 small cap stocks across all
Founded three years ago by a group of bankers, Edison provides research for
PLC clients and supplies it to institution specialists funds, funds and
analysts, both on the buy side and the sell side.
‘Once a corporate client says it wants the market to understand it and
understand its news flow, that means that more people that are actively looking
at investing in a company should be receiving research,’ says Edison’s managing
director Fraser Thorne.
Traditionally, small caps have relied on their house brokers to provide
research for investors. Research capacity in the brokerage community, however,
is at breaking point and small companies have found it difficult to generate
For an FD or chief executive eager to market their company to investors,
Edison’s research is a tool for communicating with fund managers, journalists
and private investors.
Terry O’Brien, chief executive of small-cap company LiDco, a maker of cardiac
sensor systems, said that the role of commissioned research had become vital for
small companies because of the limited distribution of house broker research.
‘Commissioned research supports company roadshows ahead of a listing and is
very useful for communicating with small cap fund managers, private client
brokers and retail investors,’ said O’Brien.
A major drawback of commissioned research, though, is a perceived lack of
It is a concern that Thorne acknowledges, but he argues that commissioned
research is no different from the credit rating process, where agencies such as
Standard & Poor’s provide ratings on companies that paid them.
‘We do not do PR, we do not do branding. Our priority is to provide an
objective view on a business. We are paid a flat fee, so we do not benefit from
any share price changes and we are not conflicted by brokerage or corporate
finance relationships,’ said Thorne.
Reed to go
Alison Reed, finance director of Standard Life, will leave the group in
October. The FTSE 100 life insurer is preparing for a series of top-level
management changes, which will see Reed and possibly chairman Sir Brian Stewart
leave the company. Reed joined Standard Life in June last year and was a key
figure in getting the £4.7bn float of the company away. Reed was one of a team
of external recruits who were brought in to galvanise the life insurer, which
had traditionally groomed its senior executives internally.
Tayler on the attack
The mutual.net’s chairman Warren Tayler has delivered a stinging attack on
accountants, believing the profession had ‘not worked hard enough at protecting
small businesses’. The direct marketing boss spoke out after hitting a deadlock
with auditors over the need to employ two sets of accountants and a trebling of
fees from the previous year.
Ewing on her way
Jose Leo will take over as BAA’s new CFO, filling the role left vacant by
Margaret Ewing’s departure. Following the takeover of Britain’s main airport
operator by Spanish infrastructure and services group Ferrovial, Ewing became
the third high-profile figure to take flight after former chief executive Mike
Clasper and corporate and regulatory affairs director Ian Hargreaves departed.
The chairman of FTSE 100 copper group Kazakhmys, Vladimir Kim, will take over
as the company’s chief executive next year and break from guidance outlined in
the Combined Code. Kim, who owns 40% of the Kazakhstan group, will replace
current chief executive Yong Keu Cha. Fund managers have little say in the
running of Kazakhmys as Kim, Cha and finance director Oleg Novachuk own more
than 65% of the business.
New Star’s ‘silly’ claim
Asset Management group New Star has criticised international financial
reporting standards as being ‘silly’ after reporting profits less £5m due to the
accounting rules. The fund management group reported strong profit growth and a
bigger maiden dividend, but complained it was forced to spread front-end charges
on unit trust sales over six years rather than book them as immediate profit.
IFRS forces fund managers to treat front-end fees conservatively.
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