Home Articles How to stage a lightning listing

    How to stage a lightning listing

    When UCMS CEO Denise Pitt decided to list this national CRM provider in less than nine weeks, her advisers thought she was joking. One year later, with a market capitalisation of around $63 million and a share price that’s increased 15 percent since the IPO, it’s Pitt who is having the last laugh. By Darren Baguley
    As a fanatical Richmond Tigers supporter, Pitt knows all about tenacity. “I’m the first to say that when I go to the footy I get white-line fever,” she says. “I’m there to barrack for Richmond, not to socialise. And I’m the same about my job… it’s like, -don’t try to do it, do it well or don’t do it at all…. If you believe, give it a hundred percent and don’t let anything divert you from your goal.”
    For anyone who knows Pitt, her resolve to list CRM provider UCMS would not be surprising. However, her decision to do it in less than nine weeks had even her most brazen advisers looking pale.
    “Our lawyers freely told us they didn’t think we’d make those dates because they were so ambitious and I’m afraid that the people in our law firm and accounting firm didn’t have any life for those nine weeks,” says Pitt, with the hint of a smile.
    For those in the know, a public listing will usually take over four months. And for most companies the compliance requirements are harrowing. Fortunately, UCMS is not like most companies, and Pitt had a rabbit up her sleeve. UCMS was already in good shape for listing, largely thinks to its existing relationship with overseas shareholders.
    “It is the norm [that most private companies would require a lot of work to ready themselves for listing], but because our investors are in Europe we’ve put a lot of processes in place to ensure they understood what was happening, that their investment was working and where the money was being spent. For example, we always had remuneration and audit committees.”
    Private equity deals, successful or otherwise, got all the limelight in 2007, but despite pundits pontificating over the impending death of the listed company (including Anthill), taking a business into public ownership via an Initial Public Offering (IPO) remains an extremely popular way of raising capital or unlocking shareholder value. But it also can become a time-consuming process that can drag on for months, and it can be difficult to insulate the business as a whole from the inevitable interruptions caused by a float.
    “For a compliance listing – the first stage before a full public float – we couldn’t afford for the business to be distracted so we set the date to list by. We then worked back with how many resources we would need and what we’d need to achieve in each time frame.”
    Undertaking a public listing has an enormous administrative burden and a sequence of events, such as lodging the prospectus by a certain date, that companies just need to meet.
    “Some parts of the process you just can’t mess with,” says Pitt. “The ASX and ASIC have very strict requirements, so it’s about mapping those along the process to make sure that you get over all the hurdles.”
    The UCMS management team knew a nine week deadline was going to be a big ask, but they decided to just get it done so they could get on with running the business. And there were additional considerations as UCMS had begun identifying some takeover opportunities.
    “Everyone tells you how much work it is but until you’re in the middle of it you don’t appreciate the sheer volume of administrative work that needs to be done,” says Pitt. “There were many nights that the whole executive team were all working back late because they [had work related to the IPO to do but still] needed to do their day jobs.”
    As an outsourcer, UCMS might have been used to meeting deadlines, but it still had to pull out all stops to make the closing date. While Pitt didn’t exactly cancel Christmas, everyone in the executive team certainly had their leave stopped, and she also nominated Director Corporate Development, Graham Hosking, as the point man to drive the project through to completion.
    Even so, Hosking still ended up putting in even later nights. “Graham was fantastic at just picking up the slack. When there was stuff that had to be done and everyone else was flat out he knew he just had to stay in,” says Pitt.
    One of the major parts of any listing is getting sign off on the prospectus. Like many companies UCMS found the verification process exhaustive, and exhausting, and to some extent it took them by surprise. “We totally underestimated the work volume of the verification process for the prospectus. We didn’t realise that every statement or claim we made in our prospectus, literally every sentence, had to have a verification document with attaching verification.
    “If we say we’re a leading outsourcer in the Australian market we had to verify and validate that. Therefore, we had to be able to print off competitor size information so that we could prove we were a leader in this market. At the time we said, ‘That’s crazy Of course we’re a leader in this market? But it doesn’t work that way.”
    The verification process is so strict that executive biographical details need to be verified. “Did they really work at that place for two years, do they really have that degree,” says Pitt. “A lot of it you take on face value when you employ someone but ASIC does not and it has to be verified.”
    Was there ever a time when Pitt wanted to close the door of her office and bang her head on the desk? “If there were I would have blanked them out by now [laughs].”
    If listing on the ASX wasn’t excitement enough, take a deep breath then consider another listing – this time in the US.
    New exchange OTCQX is designed to give non-US companies a simplified option for US exposure. Stephen Nash, Vice President with US investment bank Merriman Curhan Ford and Co, says the OTCQX provides a smart alternative for Australian companies looking to raise their US profile.
    “You can list on the OTCQX for a fraction of the cost of a fully-registered offering. Australian companies can really benefit from having US market liquidity and exposure, and enabling investors to trade in US dollars during US market hours,” says Nash.
    Launched in March 2007, the OTCQX enables foreign companies to list on a high profile, high quality exchange and rise above the noise of the traditionally risky over-the-counter market.
    “We’re looking for high-growth companies we think will trade well in the US, that we are willing to take reputational risk on in order to sponsor,” says Nash.
    Changes to US regulations have made it easier for foreign companies to issue shares. An ASX-listed company need only lodge its public statements with the US Securities and Exchange Commission (SEC) once, and then make ongoing disclosure available on the OTCQX website, representing a significant cost-saving on a fully-registered listing.
    So, feeling inspired? Take a 45-day break after your ASX listing (the required seasoning period) then start eyeing off those deep pools of US capital.
     “No seriously, there were never those moments. There were moments of ‘what have we done, what have we started.’ But I don’t shy away from a challenge. This is what we started – we’re going to finish it.”
    Although many people would have given up, or not set such a tight deadline, the decision to do so was typical of Pitt whose character was forged by the journey from working class to CEO of a listed company. She grew up in the inner-city suburb of Port Melbourne, one of three daughters of a factory production manager and a home maker.
    “It seemed like a mountain too high to climb sometimes, although when you’re on the other side you can be a bit more reflective,” says Pitt. “But there was a time when we were on the other side looking at the mountain going, Oh my God, can I really get over that?’ For anyone contemplating listing, seriously make sure it’s the right time because with the best intentions you can’t shield the business from the distractions. You can minimise but you can’t stop it. It’s a team effort and is an unbelievable process.”
    More than 60 percent of Australian companies are privately owned and they employ over 50 percent of Australians. While many of these companies are too small to ever consider listing those that do will often get a rude shock when they start to investigate what’s involved, says Family and Private Business Advisors Group managing director, Graham Connolly.
    “Private companies are often not run well enough to go to IPO without some work. [The main reasons for this] separate into management and corporate governance standards. Management standards are very often inadequate in terms of policies and procedures. Agreements, such as employment agreements, are often not documented and in place, or, if they are, they’re almost always horribly out of date in terms of occupational health and safety (OH&S), which can cause a lot of problems for a company looking to list.
    Once the appropriate management standards are put in place, Connolly says that it’s then important to assess governance standards starting with the company’s board of directors. Although three quarters of all company directors sit on private company boards, governance is almost totally focused on public companies.
    “There is a complete dearth of corporate governance for private companies, so most don’t really have a good guide as to what comprises adequate corporate governance,” says Connolly. This lack of adequate governance standards can include not having an external director or directors, the roles of the board and CEO not being clearly defined, and no audit, remuneration and OH & S committees.
    Indeed, “a lot of family companies are not even audited and a company needs to have been audited for at least three – preferably five-years before it can go to list,” says Connolly. “So they often haven’t got themselves close to what underwriters and the market expect.”


    NSX: The real deal
    When it comes to listing, bigger doesn’t necessarily mean better. Offering ‘realistic’ entry requirements and a user-friendly listing process, the National Stock Exchange of Australia (NSX) caters for SMEs looking to access growth capital and raise awareness.
    NSX CEO Richard Symons says the exchange provides a unique offering for Australian SMEs.
    “We don’t see the NSX as a staging post, before companies migrate to the ASX. I hope we can provide value-adds such that they don’t want to move on. We’d even like to encourage some of those businesses on ASX to say, ‘Listen we’re going to get better service and better visibility out of NSX’,” says Symons.
    Formed from the Newcastle and Bendigo Stock Exchanges, the NSX offers regional and industry groupings to better represent listed businesses.
    A joint venture with regional partner Business Growth Gold Coast, NSX Gold Coast supports local businesses in listing.
    “With local connections we draw attention to the local press, investors, fund managers, to all the stakeholders involved in the capital markets to say, ‘Focus on these businesses, you know them, you can watch them’. We’re keeping that regional flavour even though it’s a national exchange,” says Symons.
    Likewise, the NSX FEX-Sustainable and Cleantech Investment Market (FEX-SIM) is devoted exclusively to clean technology stocks.
    “A FEX-SIM listing means investors know the business meets the NSX and FEX-SIM criteria. It matches capital with business and minimises the cost of doing so, because all those boxes have been pre-ticked.”
    So, apart from lower entry requirements and lower listing fees (around 50 percent compared with the ASX), an NSX listing could also be your ticket to higher visibility and access to capital.

    Top Tips from UCMS CEO Denise Pitt
    Make sure you… 
    • Invest in a great legal firm and advisors with real expertise in the area
    • Don’t forget to acknowledge your team at home as well as the one in the office (you’ll need all their support to get through early mornings and late nights!)
    • Enforce controlled information management protocols
    • Remember that a listing will most likely interrupt the day-to-day job responsibilities of your senior manager
    • Don’t neglect to promote the accomplishment internally and externally, even if it’s only a small compliance listing

    Why list?
    The decision to go to IPO is primarily driven by the desire to bring an influx of capital into the organisation or, as in the case of UCMS, to give shareholders the chance to realise some of the investment’s value. Lastly, when a company gets to a certain size the collective egos of the management team can have a part to play, but there are five big questions a company’s management should ask itself, says management consultancy Bendelta founding director, Anthony Mitchell.
    1. Why? Are we very clear on our motives for going public? Is it to raise capital or provide liquidity for our investors? Is an IPO the best option for what we want to achieve?
    2. Do we understand what’s involved and do we have the experience that’s required?
    3. If we don’t, how will we solve this? Engage consultants or appoint someone with experience in publicly listing companies to the board or the executive team?
    4. Are we being realistic and are we managing risk effectively? Are we setting a realistic timetable for getting to IPO? Are we really giving ourselves enough time to make sure we get the prospectus right, get the share offering right and to make sure that it goes well?
    5. Are we checking with regulatory bodies that we’re doing the right things along the way? Are there stakeholder groups we’re consulting so that we don’t get any nasty surprises?
    According to national advisory firm PricewaterhouseCoopers, most companies list on a stock exchange to raise capital to fund the next stage of their growth, whatever their ambitions might be. But companies might also list on a stock exchange to increase public profile, broaden the base of ownership and attract different kinds of investors, provide a way for founders to exit their investment, improve public perceptions of the company’s financial strength and provide employees and directors with shares to motivate them to improve the company’s performance.

    How to list on the OTCQX:
    1. Get a Principal American Liaison – a certified US-based sponsor-to advise you on steps 2-4
    2. Establish an American Depository Receipt program allowing US investors to trade your shares on the OTCQX
    3. Be in good standing with your ASX listing, lodge financial statements once with the SEC. New postings on the ASX must be made simultaneously on the OTCQX
    4. The OTCQX listing process takes 3-4 months
    SMEs gaining entry to the NSX
    General listing requirements for NSX entry:
    1. Shareholder spread of 50
    2. Market capitalisation of $500,000
    3. Two-year adequate trading track record
    4. Twenty-five percent issued capital in public hands
    5. Nominated Adviser and Sponsoring Broker 
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