FreeAgents IPO marks a first for UK equity crowdfunding by Andy Davis
by Heather Dandridge yesterday at 12:41
FreeAgent's IPO marks a first for UK equity crowdfunding by Andy Davis
On November 16, Edinburgh-based online accountancy service FreeAgent, which offers a cloud-based accountancy and book-keeping service for freelances and small limited companies, floated its shares on the Alternative Investment Market of the London Stock Exchange. The IPO was notable because FreeAgent had raised just over £1m from 695 investors via the online equity crowdfunding platform Seedrs during 2015 – its admission to Aim therefore made it the first crowdfunded company in the UK to go public.
In its IPO, the Scottish company raised £8m of new money, while existing shareholders realised £2.7m by selling shares. However, this meant the pre-money valuation of FreeAgent at its IPO (i.e. the value of the company excluding the new money raised) was about £26m. This was lower than the pre-money valuation that FreeAgent achieved in its crowd-funding round organised by Seedrs in 2015, when the business was at more than £30m pre-money.
This illustrates clearly the potential benefits to companies in using the equity crowdfunding route to raise capital: they can have a much bigger influence over the valuation that is put on the business than is usually possible when going public, and can therefore sell fewer shares in order to raise the money they require.
And how have FreeAgent's shares fared since the IPO? A couple of weeks later they were steady at around 80p, compared with the 84p at which they were sold to institutional investors. A lot of people involved in equity crowdfunding will be watching with interest.