Stock market floatation’s are reported to be at the lowest levels since 2011. This because business investment has fallen dramatically since the Brexit Referendum with an averaged of minus 0.4% pa. The London Stock Exchange was Europe’s most active market by value with almost 30% of the proceeds raised from European IPOs generated in London. Companies are being put off floating.
The Stock market’s main function is to raise capital for companies, which sets off a virtuous cycle of making money for investors who then invest more and companies can raise more capital. There is always a long pipeline of companies seeking investment to grow but they are stuck at pre-ipo.
An escape is Near-to-IPO (CLN) Convertible Loan Note with ‘stiff incentives ‘ for the management to stick to the IPO date. Near-to-IPO investors willing and able to wait 6 months for the IPO (liquidity event) can expect a 20%-30% discount to the IPO price to convert. The carrot of course is that the IPO helps the management realise their dreams of wealth creation on a public market.
We believe the IPO market will soon improve and even have a mini-surge of interest with Brexit certainty and perhaps stimulated by the mega US unicorn deals (Uber, Abnb).
A current Pre-IPO opportunity open to qualifying investors is Terra Oil which is seeking finance with a attractively priced secured CLN (Convertible Loan Note). Investors in the CLN are due to receive 110p back for every 100p invested within six months or can convert at a 25% discount to the IPO price on floatation. It is an onshore conventional oil development project currently producing 1,280 bopd. It is planning to float at a c£100m pre-money valuation within 6 months. Thereafter the development plan is inherently saleable.
Further information is available by request here.