THE stock market flotation of The Artisanal Spirits Company on Friday offered evidence that Scottish companies are not missing out on the initial public offering (IPO) boom that has been sweeping through the City of London in recent months.
Artisanal, which owns the prestigious Scotch Malt Whisky Society, was the second Scottish concern to go public this year, and the third in nine months.
These flotations appear to underline the appeal among investors for companies that have not only delivered impressive growth amid the pandemic, but offer the potential for healthy returns in the years to come.
Although The Scotch Malt Whisky Society’s venues have been closed for much of the last 15 months, the club, which gives members access to rare and exclusive spirits, has been able to keep growing thanks in part to the strength of its e-commerce operation.
Its prospects also reflect the global attraction of Scotch whisky, which has shown no sign of dimming amid the pandemic.
The Society plans to use the gross proceeds from its successful flotation to invest in stocks of new and interesting whiskies and other spirits in a bid to drive membership numbers up around the world. It currently has around 28,000 members in 30 countries.
“We really think we can now start to build our international membership… and continue to invest in our stocks for the longer -term future as well,” managing director David Ridley told The Herald.
The other Scottish companies to have floated in recent months are seemingly also underpinned by business models with long-term growth potential.
Good timing has certainly helped Parsley Box, the ready meal company that delivers direct to consumers.
Demand for its products rocketed during the restrictive months of lockdown, as its target, older consumer base found themselves confined to their homes. But the company sees growth beyond the pandemic, too, signalling its belief that the baby boomer generation has to date been under-served.
“While everybody is looking at millennials, this fantastic demographic is being left alone,” said Parsley Box chairman Chris van der Kuyl at the time.
Scotland’s other recent float was by Calnex, which provides testing equipment for telecoms networks. With the telecommunications industry so embedded in modern lives, and only likely to expand, Calnex finds itself in a lucrative sweet spot. “The telecommunications industry is going through unprecedented levels of change, presenting exciting opportunities for the expansion of the business,” said Calnex chief executive Tommy Cook when the company’s shares were admitted to the market.
But what can these floats tell us about the Scottish economy more broadly? Do they indicate that the corporate environment here in Scotland has become more conducive to the development of companies that will one day have the potential to go public?
It is certainly good for Scotland’s international reputation if the country is seen by the wider world to be increasing its number of listed companies. And it is clearly an encouraging sign that Scotland is producing companies with the kind of compelling growth stories that are convincing investors to get on board.
But this is more likely to be down to the entrepreneurial nous of the individuals behind such companies, and the vision and patience of their early backers, than the setting established by the state.
Indeed, frustration has been expressed in some quarters, for example, that the state-backed Scottish National Investment Bank has made just two investments since it officially opened its doors with a £2 billion war-chest before Christmas.
Its first came in November, when it provided £12.5m of growth capital for Glasgow-based M Squared Lasers. The bank then announced its second deal in February, when it invested £40m in a fund that will be used by Places for People to invest in affordable homes for rent.
“They need to find new investment cash for those entrepreneurs and get them moving at an earlier stage,” said Mr van der Kuyl when asked in April how government could support business.
It may be understandably difficult for any government to see beyond helping companies survive the immediate crisis. But longer-term, patient backing for companies that have the potential to deliver real growth and jobs, be it from government, banks or other investors, is going to be crucial to Scotland’s future prospects.
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