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1 London: A Complementary Public Market Liquidity Route For Smaller US Growth Companies April 2019

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Page 1: London: A Complementary Public Market Liquidity Route For

1

London:

A Complementary Public Market

Liquidity Route For Smaller US Growth

Companies

April 2019

Page 2: London: A Complementary Public Market Liquidity Route For

2

Executive Summary

London is the international exchange – over a third of London’s new listings in 2018 were international

Step change in the number of companies listing from the Americas – 40 in the last two years

Public investment fund market has very different character to the US and offers significant opportunity for

asset managers in the Americas to access new pools of capital

London offers a supportive environment for companies in the $30-500m market cap range and a

complementary liquidity route relative to the US public markets for companies of all sizes

Much lower revenue threshold for IPO – tech companies range of $10-100m, revenue generating medtech / life sciences services and mature industrial companies with revenues as high as $500m

London’s growth market, AIM, seeing increasingly larger deals and more sector diversification

Large, high quality investor base oriented towards small and micro cap offerings – active equity investor base for AIM and Main Market essentially the same, no liquidity differential between AIM and Main Market and London liquidity is less fragmented than the US

Ongoing access to follow on capital; potential for selldown at IPO – VC backed fintech Boku excellent case study – large secondary component in IPO, subsequent selldown at substantial premium by VCs, recent acquisition using stock as currency

Third party data shows London listing means lower transaction costs, ongoing costs & litigation risk relative to US. London also has half yearly rather than quarterly reporting

Page 3: London: A Complementary Public Market Liquidity Route For

3

A Snapshot of London Stock Exchange 2018 IPOs Financials and Technology are leading sectors

2018 IPOs* by sector 2018 IPOs, split of primary and secondary issuance

Source: Dealogic, January 2019

All calculations are based on a deal first trade date

*Number of IPOs per sector

**Raising more than £20m

35

21

6

5

3 3

2 2 2

Financials

Tech and Fintech

Basic Materials

Support Services

Oil & Gas

Real Estate

Consumer

Healthcare

Industrials

79

IPOs 77%

73%

23%

27%

0% 20% 40% 60% 80% 100%

AIM

Main Market

Average of Shares by Issuer as % (Primary)

Average of Shares by Shareholder as % (Secondary)

Main

Market AIM

No. of IPOs 43 35

Average Deal

Size (£m) 253 54

Average Market

Cap at IPO (£m) 717

112

Company Aquis Exchange

Market AIM

Market cap at IPO $97m

Current market cap $210m

% price change 118%

Description Cash equities trading venue

Company GRC International Group

Market AIM

Market cap at IPO $56m

Current market cap $88m

% price change 66%

Description IT service management

London’s Best Performing 2018 IPOs** London Markets 2018 Summary

Page 4: London: A Complementary Public Market Liquidity Route For

4 4

Source: Dealogic, London Stock Exchange, January 2019

All calculations are based on a deal first trade date

113 New Listings in 2018 34% of new joiners are international

New Joiners to London Stock Exchange in 2018

0

2

4

6

8

10

12

14

16

18

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

IPOs Introductions

5

4

14

7

12

17

14

4

3

10

13

10

London Stock Exchange welcomed 113 new listings

this year, including 79 IPOs and 34 introductions

June was the busiest month in 2018 with 17 new

joiners, including 12 IPOs and 5 introductions

34% of all new joiners in 2018 are international (38

companies)

Some of the major introductions included Worldpay,

Cablevision Holding, Gran Tierra, Danakali, Dish

TV, MOD Resources, among others

Case study: Jadestone Energy

3 months ADTV

on TSX before joining

LSE

$9,739

8 August 2018

TSX-listed Jadestone Energy joins AIM and raises £84m

3 months ADTV

on London post

London listing

$475,124

3 months ADTV

on TSX post London

listing

$51,781

x9

greater ADTV in London vs

Toronto

432%

increase In TSX average

daily trading value

The London listing not only provides greater

liquidity, but also contributes to the liquidity of

Jadestone Energy shares in Toronto.

Page 5: London: A Complementary Public Market Liquidity Route For

5 5

574

354 337

285

182

0

100

200

300

400

500

600

700

LS

E

Nasd

aq

SG

X

TS

X

NY

SE

The International Market of Choice

More international companies choose London for listing than any other exchange.

Our issuers operate in over 100 countries around the world – including c. 150 Americas companies listed in London

23 Americas companies chose London for their listing in 2017 and 17 in 2018.

Selected Recent North American Listings in London London Has More International Companies Than Any Other Exchange

Source: London Stock Exchange, FactSet, Dealogic, February 2019

Our country of primary business methodology uses FactSet data and takes into account the country of largest revenue exposure, headquarters and incorporation

Int'l Companies as %

of total companies

SGX 51%

LSE 37%

TSX 37%

NASDAQ 14%

NYSE 10%

Name

Mkt Cap at

Listing

($m)

Deal Size

($m) Sector

% Change

Offer to

Current Renalytix AI 81 29 Healthcare +3

Argo Blockchain 62 33 Technology -80

Jadestone 211 110 Oil & Gas +83

Transglobe 200 - Oil & Gas -32

Serinus 40 - Oil & Gas +2

Polarean Imaging 16 4 Healthcare +17

Boku 165 59 Fintech +52

ContourGlobal 2,202 579 Renewables -33

TI Fluid Systems 1,744 536 Consumer

Goods -25

Bacanora 158 8 Basic

Materials -73

SDX 23 11 Oil & Gas +119

Diversified Gas & Oil 86 50 Oil & Gas +78

LoopUp Group 53 11 Technology +205

MaxCyte 43 14 Healthcare +164

PureTech Health 571 195 Healthcare +6

Page 6: London: A Complementary Public Market Liquidity Route For

6

Opportunity for Asset Managers More closed-end investment fund IPOs than any other global exchange

Source: London Stock Exchange, Dealogic, FactSet, Morningstar, February 2019

Note: Investment funds include closed-end funds, investment companies, vehicles and SPACs

:

30% Proportion of

total IPO capital

on London Stock

Exchange raised

by investment

funds

35 Listings of

investment funds

in 2018

2% Average trading

premium to NAV

of closed-end

investment fund

IPOs in 2018

Biopharma Credit Providing debt financing to life science companies

Americas strategies welcomed in 2018

Marble Point Loan

Financing

Providing exposure to a diversified portfolio of US Dollar

denominated, broadly syndicated floating rate senior

secured corporate loans.

Trian Investors 1

Aiming to obtain a substantial minority investment in a

high quality, but undervalued and underperforming,

company publicly listed in the UK or US.

CEIBA Investments

The largest listed foreign investor in Cuba, with a

a portfolio of Cuban real estate assets, including tourism-

related and commercial properties.

“The strong support we have received from institutional investors, which has resulted

in the issue exceeding our original target to raise $300m, demonstrates the attraction

of the investment proposition Biopharma Credit offers the market.”

Jeremy Sillem, Chairman, Biopharma Credit

— Managed by NYC based Pharmakon / Royalty Pharma

— Raised $761.9m in March 2017 to provide debt financing to life science companies

— Has since returned to market on 3 occasions, raising over $622m, with their largest

and most recent in November

— Trading at a 6% premium to Net Asset Value

London’s public investment fund market has very

different profile to the US. Offering access to large new

pools of capital under a flexible regulatory regime

Page 7: London: A Complementary Public Market Liquidity Route For

7

Main Market – Premium Main Market – Standard AIM

Advisor Listing sponsor n/a Nominated Advisor (NOMAD) all

times

Free Float 25% 25% * n/a

Revenue Track Record 3 years for 75% of business ** n/a n/a

Corporate Governance

UK combined code

(Independent non-executive Chairman,

half board independent)

Statement on Corporate Governance

Adherence to recognised code

(Board Committees, Multiple Non-

Executive Directors)

Reporting Half Yearly Half Yearly Half Yearly

Investors at IPO Institutional / Retail Institutional / Retail Institutional / Certain Individual

Investors***

Significant Transactions

(Acquisitions / Divestitures)

Class Tests - Often shareholder

approval needed n/a

Class Tests - Usually only regulatory

disclosure / press release required

Confidential Filing Registration statement issued before

equity deal research published

Registration statement issued before

equity deal research published

Yes, sometimes issue intentional to

float when deal research published.

Prospectus available after pricing

Voting Rights Multiple classes not permitted,

pre-emption rights

Multiple classes permitted,

pre-emption in some cases

Multiple classes permitted,

pre-emption in some cases,

usually dis-applied for placings

Typical

Size

Average IPO Deal Size 2018 $253m $54m

Average Market Cap at IPO

2018 $717m $112m

* If depositary receipts applies to DRs only

** Exemptions apply for “scientific research” companies, usually biotechnology companies

*** Subject to company being deemed eligible, individual accredited investors under tax incentivised investment schemes such as EIS may

invest subject to annual cap

London’s Corporate Listing Alternatives

Page 8: London: A Complementary Public Market Liquidity Route For

8 8

127

84

325

142

192

39 14

0

50

100

150

200

250

300

350

$0-5m $5-10m $10-50m $50-100m $100-500m $500m-1bn $1-5bn

Source: London Stock Exchange statistics, January 2019

The Changing Face of AIM AIM is now a more diverse, mature and high quality market

923 companies,

aggregate value of

$116bn (142 Int’l

companies)

Profile of AIM Companies Industries represented (by no. companies)

Average market cap of AIM companies Average money raised at IPO by AIM companies

Industrials, 159

Financials, 155

Basic Materials, 123 Technology, 119

Oil & Gas, 103

Consumer Services, 101

Health Care, 89

Consumer Goods, 54

Utilities, 11 Telecommunications, 8

69

126

0

20

40

60

80

100

120

140

2005 2018

$m

28

54

0

10

20

30

40

50

60

2005 2018

$m

Page 9: London: A Complementary Public Market Liquidity Route For

9 9

Source: Dealogic, Bloomberg, FactSet, Morningstar, January 2019

Median offer size and market cap at IPO of AIM companies, 2009-2018

—AIM stocks’ representation in funds have continued to grow in recent years as fund remits have broadened to allow a

greater proportion of their assets to be invested in AIM-listed stocks

—This has seen the average offer size and market cap at IPO grow, and market liquidity follow its upward trend

Volume of FTSE AIM All-Share shares traded

AIM Offer Sizes Continue to Grow Liquidity rises as institutional investor pool expands

0

1

2

3

4

5

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Vo

lum

e tra

de

d (

bill

ion

s)

0

20

40

60

80

100

120

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

$m

Median Deal Size

Median Market Cap at IPO

Page 10: London: A Complementary Public Market Liquidity Route For

10 10

- London Stock Exchange’s Main Market is consistently less volatile when compared to US markets. Much of this is driven by its

diversified international investor base and focus on institutional investment.

- AIM displays relatively higher volatility due to its focus on high growth companies.

- Despite this, in recent years IPOs on AIM have been more stable compared to the US exchanges.

Lower Price Volatility

Source: Dealogic, FactSet, London Stock Exchange Calculation, January 2019

Note: All IPOs since 2011. Daily price volatility since listing annualized

Price volatility across markets, year by year

0

20

40

60

80

100

120

140

2011 2012 2013 2014 2015 2016 2017 2018

AIM London Nasdaq NYSE

Page 11: London: A Complementary Public Market Liquidity Route For

11 11

FINRA TRF 20%

NASDAQ 16%

Dark Pools 15%

NYSE 13%

Arca 11%

DirectEdgeX 7%

BATS 7%

Other Exchanges 11%

U.S. Market Split by Venue, 20152

Not All Liquidity Is The Same US markets see higher level of fragmentation and proportion of High Frequency Trading

LSEG 68%

Bats Europe 30%

Other 2%

U.K. Market Split by Venue, 2015 1

LSEG NYSE Group

Total # Trade -1y 145m trades 218m trades

Avg trade size 785 shares/trade 214 shares/trade

“Markets today are fragmented across

11 exchanges and over 60 electronic

crossing networks and Alternative

Trading Systems (ATS).

No single trading venue or exchange

accounting for more than

20% of total market volume.”

The majority of turnover in London listed

stocks match on LSEG.

LSEG accounts for more than two thirds of

trading. LSEG, therefore, has a

comprehensive view of trading activity of

stocks listed in London.

Fragmentation

adds to cost and

complexity.

“Given that

custodians charge

by trade,

fragmentation and

execution through

multiple brokers

has had cost

implications for

institutional

investors”3

0

10

20

30

40

50

60

70

80

New York London

% of HFT in Trading1

1Source: Fidessa, Jan 2017, The Brattle Group and CS Trading Strategies report. FTSE 100 trading split by venue owner, Jan 2017 2 Credit Suisse Trading Strategy 3The Impact of Equity Market Fragmentation and Dark Pools on Trading and Alpha generation

https://investments.voya.com/idc/groups/public/documents/investor_education/fundspace_bswp-darkpools.pdf

Page 12: London: A Complementary Public Market Liquidity Route For

12 12

A Vibrant Small Cap IPO Ecosystem UK typically more supportive of small / micro caps than US

Source: London Stock Exchange database, Dealogic, February 2019

.

Deal Size vs Market Cap at IPO in 2018 Number of IPOs by Companies of Market Cap lower than $250m

Small Cap Post-IPO Performance (2014 – 2018)

London’s AIM provides companies with smaller

market caps access to long-term capital

London is home to a similar number <$250 million

market cap IPOs to the US, despite the size of the

US economy. If biotech and blank check IPOs are

excluded, London has a clear lead

IPOs in this market cap bracket have performed

better in the UK than in the US

112

717 843

2,221

54

253 171

447

0

500

1,000

1,500

2,000

2,500

London AIM Lonond Main Market Nasdaq New York

Deal

siz

e a

nd

mark

et

cap

in

US

D

millio

n

Avg Market Cap Avg Deal Size

73

56 51

80

57

97

63

39

53

65

8 10 8 12

7

0

20

40

60

80

100

120

2014 2015 2016 2017 2018

LSE Nasdaq NYSE

8.6%

4.5% 4.3% 4.5%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

LSE Nasdaq NYSE United States

Page 13: London: A Complementary Public Market Liquidity Route For

13 13

Diversified Gas & Oil Boku LoopUp

Industry Oil & Gas Fintech Technology

Country of Origin

Country of Incorporation UK US UK

Listing Date 3 Feb 2017 14 Nov 2017 19 Aug 2016

Market Cap at IPO $88.1m $165.1m $53.5m

Current Market Cap $828.0m $263.5m $221.2m

Deal Size $49.7m $58.9m $11.1m

% Primary / % Secondary 100 / 0 33.3 / 66.6 100 / 0

Historical Revenue at IPO $13.7m $17.1m $13.4m

Key shareholders

HSBC

Premier Fund Managers

Blackrock

Standard Life Aberdeen

Khosla, Andreesen Horowitz,

Benchmark, Index, NEA, River &

Mercantile Group

Merian Global Investors

Jupiter Asset Management

Baillie Gifford

Octopus Capital

Follow On Offerings

$35.1m – Jun 2017

$187.6m – Jan 2018

$248.0m – Jun 2018

$32.2m – Dec 2018

$52.9m – Sep 2018 $67.6m – May 2018

$12.0m – Sep 2017

Geographical Exposure

Source: FactSet, Dealogic, January 2019

.

US 100%

UK 40%

US 51%

Europe 5%

RoW 4%

Japan 43% Germany

30%

UK 23%

Taiwan 4%

Lower Revenue & Market Cap Threshold Offering support to smaller North American companies

Page 14: London: A Complementary Public Market Liquidity Route For

14 14

Maxcyte Creo Medical Renalytix AI

Company Description

MaxCyte is a Gaithersburg, MD based

developer and supplier of electroporation

technology and instrumentation to

biotechnology and pharmaceutical firms

engaged in cell therapy, drug discovery

and development, bio manufacturing, gene

editing and immuno-oncology.

Creo Medical Group Plc operates as a

medical device company that focuses on

surgical endoscopy. It develops CROMA,

an electrosurgical platform that delivers

microwave and bipolar radio frequency for

precise localized cutting and microwave for

controlled coagulation.

Founded in 2018, Renalytix AI Plc

manufactures medical devices and

equipment. It offers artificial intelligence for

kidney disease.

Country of Origin

Country of

Incorporation United States United Kingdom United Kingdom

Listing Date 29 March 2016 09 December 2016 06 November 2018

Market Cap at IPO $43.2m $103.2m $81.2m

Current Market Cap $124.8m $364.2m $88.5m

Deal Size $14.2m $25.4m $28.9m

% Primary / %

Secondary 100/0 100/0 100/0

Key shareholders

Legal & General Investment Mgt

Unicorn Asset Management

Hargreave Hale

BlackRock Investment Mgt

Hargreave Hale

Baillie Gifford

AXA Investment Managers

Octopus Investments

Lombard Odier, Legal & General

Investment Mgmt, Polar Capital

Follow On Offerings $24.9m – March 2017

$14.0m – February 2019 $64.0m – July 2018 -

London Also Supports Smaller Life Sciences

Companies

Source: FactSet, Dealogic, February 2019

Page 15: London: A Complementary Public Market Liquidity Route For

15 15

Source: EPFR Global, December 2018

Referendum, June 2016

Article 50 triggered, March 2017

Total Net Assets into

UK Mandated Funds

is up 3% to $276bn

since the Referendum

$276bn

Since June 2016

global AuM of UK

equities has

increased by $150bn,

76% of this increase

has occurred

following Article 50

+$150bn

Monthly Flows and Allocations into UK Mandated Funds

All Country Flows and Allocations into UK Equities

Dedicated Pool of UK Capital $276bn available that can only be invested in UK listed companies

267 276 276

-4

-3

-2

-1

0

1

2

0

50

100

150

200

250

300

350

400

Dec-1

5

Jan

-16

Fe

b-1

6

Ma

r-16

Ap

r-16

Ma

y-1

6

Jun

-16

Jul-1

6

Au

g-1

6

Se

p-1

6

Oct-

16

Nov-1

6

Dec-1

6

Jan

-17

Fe

b-1

7

Ma

r-17

Ap

r-17

Ma

y-1

7

Jun

-17

Jul-1

7

Au

g-1

7

Se

p-1

7

Oct-

17

Nov-1

7

Dec-1

7

Jan

-18

Fe

b-1

8

Ma

r-18

Ap

r-18

Ma

y-1

8

Jun

-18

Jul-1

8

Au

g-1

8

Se

p-1

8

Oct-

18

Nov-1

8

In/o

ut

flo

w (

$b

n)

Au

M (

$b

n)

AuM In/out flow

716 752

866

-8

-6

-4

-2

0

2

4

6

8

10

0

200

400

600

800

1000

1200

Dec-1

5

Jan

-16

Fe

b-1

6

Ma

r-16

Ap

r-16

Ma

y-1

6

Jun

-16

Jul-1

6

Au

g-1

6

Se

p-1

6

Oct-

16

Nov-1

6

Dec-1

6

Jan

-17

Fe

b-1

7

Ma

r-17

Ap

r-17

Ma

y-1

7

Jun

-17

Jul-1

7

Au

g-1

7

Se

p-1

7

Oct-

17

Nov-1

7

Dec-1

7

Jan

-18

Fe

b-1

8

Ma

r-18

Ap

r-18

Ma

y-1

8

Jun

-18

Jul-1

8

Au

g-1

8

Se

p-1

8

Oct-

18

In/o

ut

flo

w (

$b

n)

Au

M (

$b

n)

AuM In/out flow

Page 16: London: A Complementary Public Market Liquidity Route For

16

UK-Dedicated AuM Remains Robust Europe’s largest pool of dedicated capital stands at $276bn

Source: EPFR Global, as of January 3, 2019

2.4x

4.0x

4.8x

7.0x

30x

44x

47x

95x

Largest Western European country-dedicated AuM

Relative size of

UK pool vs other

W. European

countries

The UK has a significantly larger

pool of dedicated capital compared

to its European peers with $276bn in

dedicated AuM

UK dedicated pool of capital has

remained consistently larger despite

downward pressure on UK equity

markets and GBP in 2018

A listing on the Main Market/AIM

enables access to a broad pool of

European-dedicated capital in

addition to UK-only capital (which is

unavailable to other European

destinations) 2

2

3

6

6

9

39

58

70

116

276

0 100 200 300 400

Belgium

Netherlands

Austria

Italy

Norway

Spain

France

Sweden

Germany

Switzerland

United Kingdom

AuM of Country Mandated Funds ($bn)

126x

170x

UK 47%

Europe ex UK 53%

Page 17: London: A Complementary Public Market Liquidity Route For

17 17

Source: FactSet, January 2019

Access to Blue Chip Investors For London-listed American small cap growth companies

Boku

Old Mutual Global Investors

River & Mercantile Asset

Management

Legal & General Investment

Management

Maxcyte

Legal & General Investment

Management

Unicorn Asset Management

Hargreave Hale

Verseon

Lazard Asset Management

City Financial

Artemis Investment

Management

Top investors in selected Americas IPOs

PureTech Health

Herald Investment

Management

Woodford Investment

Management

Taaleri Varainhoito Oy

Top Institutional Holders of AIM Equities Value Held ($bn)

Canaccord Genuity Group, Inc. 3.8

Invesco Ltd. 3.5

Standard Life Aberdeen Plc 2.7

Old Mutual Global Investors (UK) Ltd. 2.3

Woodford Investment Management Ltd. 2.3

BlackRock, Inc. 2.3

Liontrust Asset Management Plc 2.1

Octopus Capital Ltd. 1.9

Hargreaves Lansdown Plc 1.9

Schroders Plc 1.8

Investec Plc 1.3

The Capital Group Cos., Inc. 1.3

Baillie Gifford & Co. 1.2

AXA SA 1.2

Janus Henderson Group Plc 1.1

Miton Group Plc 1.1

Fidelity 1.0

Affiliated Managers Group, Inc. 1.0

T. Rowe Price Group, Inc. 1.0

JPMorgan Chase & Co. 0.9

Page 18: London: A Complementary Public Market Liquidity Route For

18 18

AIM Offers VC/PE Monetisation Route for Smaller Portfolio Companies

Source: Dealogic, February 2019

Selected AIM FO’s with Secondary component post an AIM IPO (IPOs in 2014 - )

AIM Company FO date FO Capital

Raised ($m)

Market Cap

at FO ($m) Sector

% of Company

Sold

Shares by

Issuer as %

Shares by

Shareholder as % IPO date

MaxCyte Inc 05/02/2019 14 138 Healthcare 10.9 94.9 5.1 29/03/2016

Focusrite plc 24/01/2019 10 376 Tech 2.5 0 100 11/12/2014

Gamma Communications plc 13/12/2018 38 1009 Telecommunications 4.1 0 100 07/10/2014

K3 Capital Group plc 25/09/2018 6 175 Financials 3.6 0 100 11/04/2017

Boku Inc 21/09/2018 53 518 Tech 11.7 0 100 14/11/2017

Bilby plc 04/09/2018 16 55 Industrials 31.3 0 100 06/03/2015

Fevertree Drinks plc 07/08/2018 134 5510 Consumer 2.6 0 100 04/11/2014

IMImobile plc 11/07/2018 16 261 Tech 6.1 0 100 27/06/2014

Fevertree Drinks plc 23/03/2018 117 4822 Consumer 2.6 0 100 04/11/2014

Morses Club plc 21/02/2018 33 243 Financials 14.2 0 100 29/04/2016

Ramsdens Holdings plc 08/12/2017 21 73 Financials 30.7 0 100 02/02/2017

Focusrite plc 30/11/2017 34 253 Consumer 13.8 0 100 11/12/2014

K3 Capital Group plc 28/09/2017 6 85 Financials 7.5 0 100 11/04/2017

LoopUp Group plc 25/09/2017 12 160 Tech 8.4 0 100 19/08/2016

boohoo.com plc 08/06/2017 169 3268 Tech 5.2 38.3 61.7 07/03/2014

Cerillion Technologies Ltd 26/05/2017 7 56 Tech 14.2 0 100 14/03/2016

Gear4music (Holdings) plc 19/05/2017 13 190 Tech 7.0 42.1 57.9 28/05/2015

Watkin Jones plc 24/03/2017 88 491 Industrials 19.7 0 100 17/03/2016

Purplebricks Group plc 16/03/2017 29 1002 Financials 2.9 0 100 03/12/2015

0

10

20

30

40

50

60

$0-250m $250-500m $500m-1bn $1bn+

Average % of IPO size consisting of secondary selldown, 2015-2018

London Nasdaq NYSE

87

92

75

78

77

13

8

25

22

23

0% 20% 40% 60% 80% 100%

2014

2015

2016

2017

2018

AIM IPOs Average Primary/Secondary Allocation (%)

Average of Shares by Issuer as %

Average of Shares by Shareholder as %

Page 19: London: A Complementary Public Market Liquidity Route For

19 19

50%

37%

0%

10%

20%

30%

40%

50%

60%

% IPOs that have returned forFO(s)

% IPOs that have returned formore than 1 FO

Source: Dealogic, January 2019

1) Companies considered are those that had a primary raise at IPO since 2015. Median multiple of 30 days trading: The block size compared to the average daily trading in the 30 days

preceding the issue. (Average of Total Shares / Average ADTV Previous 30 Trading Days).

2) premium/discount defined as percentage change from last trade before follow-on offer to offer price. Negative value indicates a discount.

Unparalleled Follow On Environment Newly listed companies are able to raise additional capital

IPOs and FOs, 2013 – 2018

Over the last 5 years, nearly 50% of newly public

companies have accessed additional equity capital in

follow on transactions

Approximately 15% of all FOs since 2013 have been

conducted by companies that have gone public in the

same period

-6.7%

Median Discount 2 Median Multiple (x, multiple of previous 30

days trading) 1

126x

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Source: Bloomberg, Dealogic, Factset, London Stock Exchange Computations, March 2019

*No primary capital received – selldown of existing shares held by Trive Capital received as consideration in Core Appalachia deal

Admission Date 03 Feb 2017

Money Raised $49.7m

Market Cap at IPO $86.1m

Current market cap $804.9m

Diversified Gas & Oil Growth Story Post IPO Using AIM as an Acquisition Platform

Follow On Capital Markets

Transactions

Date Deal Size

15 June 2017 $35.1m

31 January 2018 $187.6m

29 June 2018 $248.0m

13 December 2018 $32.2m*

Share

price (

$)

Top 5 Institutional Investors

(value held $m)

Sand Grove Capital Management

Premier AM Holdings

BlackRock, Inc.

Pendal Group

Man Group

69.1

54.5

42.4

26.9

23.4

Alabama headquartered with assets in the Appalachian

basin, Diversified Gas & Oil floated in Feb 2017 with a

market cap of $86m and less than 3,000 boepd of

production. In approximately 2 years, DGOC completed 8

acquisitions with total value of $1.2bn and 3 follow on equity

raises totalling $465m. It now has a market cap of $800m

and production of c. 70,000 boepd

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21 21

3.8%

6.5%

5.7%

3.5%

6.4%

5.8%

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

LSE NASDAQ-US NYSE

Un

derw

riti

ng

fee %

London Stock Exchange

2017 2018

Comparison of Underwriting Costs for IPOs (%)

UK vs US IPO Cost Comparison UK typically lower cost

Source: Dealogic, January 2019

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22

Source: Stanford Law School in collaboration with Cornerstone Research, http://securities.stanford.edu/research-reports/1996-2017/Cornerstone-Research-Securities-Class-

Action-Filings-2017-YIR.pdf

*DDL- The total decline—that is, the dollar value change—in the market capitalisation of a defendant company from the trading day immediately preceding the end of the

class period to the trading day immediately following the end of the class period. Mega DDL filings have a dollar loss of at least $5 billion. **Source: SEC Website

Comparison of US and UK Regulatory Regimes

Key Issue United States United Kingdom

Quarterly

Reporting

Liability regime

arising from

disclosure

Sarbanes Oxley introduces a risk of

personal criminal liability for CEO

and CFO who must sign-off on

disclosure, financial and accounting

controls and disclosure in SEC filed

annual report.

Directors responsible for content of

annual report, would not incur

personal criminal liability except in

cases of fraud.

Directors and

Officers Insurance

D&O Insurance costs are typically 3x

more expensive for a company

listed in the US due to the

significantly more litigious

environment compared to the UK.

Owing to the less litigious

environment, D&O Insurance is

generally far cheaper in the UK than

the US

Litigation

Plaintiffs filled a record 412 new

federal class action securities

cases in 2017

This is 52% higher than 2016 and

more than 2x than 1997-2016

average

Snap Inc (NYSE.SNAP) was

subject to class action filing 2

months after listing.

In January 2018, Brazilian oil

company Petrobras agreed to pay

$3bn as settlement to a class

action lawsuit

We were not able to identify a class

action in the UK against any

London listed foreign company.

This compares to 336 class actions

against foreign US listed companies

since 2008.

0 1000 2000 3000

US Corporate

Foreign Corporate

USDm

FCPA 2016 Settlements against US vs Int’l firms**

Market Cap loss that preceded class action

(Direct Dollar Loss* by size Average (1997-2015))

54%

11%

8%

10%

8%

6% 3%

Mega ≤$500M ≤$1B ≤$2B ≤$3B ≤$4B ≤$5B

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US Litigation Environment Class Action lawsuits are increasing in frequency

On 2018 levels, companies

publicly traded in the US are

being sued at an annualized rate

of nearly 9%. This compares to

2016 rate of 5.6%, and the 1996

– 2015 average of 2.5%.2

— 24 foreign

issuers sued in

H1 2018

— 50 foreign

issuers sued in

2017

2018 was third most litigious year since 1996. Only 2001 and 2017 saw more filings :

— In 2018, there were 396 class action law suits.

— Significantly above historical average of 203 per year.

— Following the 412 lawsuits in 2017, the trend of an increasing number of class

actions continues.1

1 http://securities.stanford.edu/

2 http://www.dandodiary.com/2017/04/articles/securities-litigation/need-know-ytd-securities-class-action-lawsuit-filings-off-charts/

3 https://www.cornerstone.com/Publications/Reports/Securities-Securities-Class-Action-Filings%E2%80%942018-Midyear-Assessment

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25

Sarah E Baker

Head of Strategic Engagement, North America

LSEG New York office

+1 917 582 1815

[email protected]

Chris Mayo

Head of Primary Markets, Americas

LSEG Chicago & New York offices

+1 646 925 9811

[email protected]