(BFM Bourse) – PrimaryBid allows individual shareholders to participate in express fundraising under the same access conditions as institutional investors. Since its launch in June 2021, the platform has given small shareholders the opportunity to participate in around ten transactions concerning the capital of companies such as Ecoslops or Carmat on two occasions.
Listed companies are generally confronted in their stock market life with the fact of having to solicit the help of shareholders to give them some financial air. Especially innovative companies that massively need new money to continue their adventure.
To do so, they generally resort to capital increases. These operations with maintenance of preferential subscription rights entail a certain number of constraints – particularly in terms of timing and flexibility in setting the price in relation to the prices preceding the operation. Or, they opt for private placements, these capital increases reserved for institutions capable of placing a ticket of around 100,000 euros at least, for a negotiated price, which makes it possible to bring together the targeted funds in a few hours. Individual shareholders are by nature excluded from this type of operation.
But for a little less than two years, companies now have another way to finance themselves. Launched in June 2021 in partnership with Euronext, the PrimaryBid platform offers retail investors the opportunity to participate in fundraising for listed companies under the same conditions as institutional investors. “French companies that use PrimaryBid will be able to access a new source of financing, while improving their governance by treating the different categories of investors on an equal footing”, indicated PrimaryBid when it was launched in France.
“Put everyone back on the same level”
In concrete terms, these operations are carried out in two distinct but concurrent parts, which makes them unique. On the one hand, the fundraising offers a reserved offer intended for specialized and strategic investors as well as another offer, called “accessory” to the reserved offer which is intended for individual investors. Fundraisers are subscribed within hours at a discount. Finally, small holders can participate in operations under the same conditions as those valid for professional investors.
“We allow individual investors to connect to private placements, these fundraising operations by already listed companies which only last a few hours. These operations are offered with a discount which is historically reserved for investors and which can be order of 20%”, explains François De Wiljes, general manager France of PrimaryBid on the antenna of BFM Bourse.
Customers of Bourse Direct, Boursorama and EasyBourse can therefore participate in the operations offered by the British fintech since June 2021. Thus, when a listed company launches a private placement, which takes place outside trading hours, the clients of partner brokers are informed that they can take part. PrimaryBid centralizes the orders (note that they are irrevocable, given the very short deadline) and then supervises the settlement-delivery. “For operational and historical reasons, individuals were excluded because as these operations only last a few hours, it is very difficult to offer an offer to individuals under these conditions”, he recalls.
Small shareholders who were by definition excluded from private placements are therefore no longer excluded from this type of operation, at least for those who have an account with one of the partner brokers offering the platform.
“PrimaryBid’s interest is to associate existing shareholders with the offer and not to reserve the discount for institutional investors. As far as the individual shareholder is concerned, the value proposition is to participate free of charge in offers of discounted securities. We are here to correct the anomaly and bring everyone back to the same level, without bringing complexity to the issuer”, continues François De Wiljes.
A well-established company can use the PrimaryBid platform. But in reality, the situation is quite different and it is generally innovative companies with significant cash requirements that tend to seek out the markets to finance their growth. “Our value proposition is aimed at all listed companies. The reality is that the companies that will appeal to the capital market are small and mid-cap issuers active in life sciences, in the transition energy, new technologies. In other words, issuers who need to finance their growth”, recalls the manager. In particular in 2022, in a context of risk aversion which paralyzed operations. The PrimayBid platform has emerged as a lifeline amidst an ocean of uncertainty. Companies in need of financing were therefore able to seek the help of individual investors during these flash fundraisers.
Thus, they were able to subscribe to the express fundraising of Ecoslops, specialist in the recycling of oil residues (“slops” and “sludges”) from maritime transport which had raised in October 2021 6.4 million euros including 0, 7 million via the platform, or that of Global Bioenergies (1 million euros out of a total amount of 14.5 million). Arcure, Valbiotis or Kalray have also used this method of financing to strengthen their cash flow.
The amounts raised via the PrimaryBid platform seem small given the size of the overall operation. But it is linked to a regulatory request: “It is specified that the PrimaryBid offer intended for individuals is “ancillary” to the reserved offer and that it will represent a maximum of 20% of the amount of the global offer. , is indicated in each press release announcing the terms of the operation. Above all, the amounts raised via the platform are limited to 8 million euros. Not one euro more.
A lifting of the ceiling?
Moreover, Carmat has experienced, in spite of itself, the limits of this method of financing. During its first operation in April 2022, the French medtech was thus able to collect 4.1 million euros via the platform out of a total amount of 40.5 million raised. Some 1,600 individual shareholders then participated in this express financing. Then a few months later, Carmat once again had recourse to this singular financing to ensure the future of its artificial heart.
However, this ceiling of 8 million euros is only valid for 12 rolling months. Carmat was not able to take full advantage of the possibilities offered by the PrimaryBid platform during the second operation. Last December, the company was only able to raise 3.9 million euros from retail investors, out of an amount of 5.4 million euros in requests. It is therefore a windfall of 1.5 million euros from small shareholders that escaped the finances of Carmat.
Moreover, François De Wiljes deplores the maintenance of this ceiling of 8 million euros. “We came up against this ceiling with the Carmat operation and if we carried out operations with large emitters in France, we would have this same problem which would arise. In England, we were able to raise 50 million pounds sterling in a matter of hours,” he explains.
“This ceiling is intended to evolve because it was originally set for crowdfunding operations. We are currently in discussions with the various regulators. There is an ongoing consultation with the European Commission, which has made proposals in this direction last December to remove this ceiling but also the cross-border barriers that currently exist. For example, we would like a Belgian investor to be able to participate in the Carmat operation” adds François de Wiljes.
Buy a pizza to subscribe to an IPO
With regard to IPOs, PrimaryBid also intends to offer an innovative offer similar to that offered for private placements. François De Wiljes takes the example of Operation Deliveroo to illustrate these offers to the community. Users also become shareholders. “To participate in Deliveroo’s IPO, users had to log into the app, buy pizza and make a credit card payment to participate in the IPO. As a Deliveroo customer, you were then favored in the IPO process. We want to do the same thing, but a little differently, with our partners.” PrimaryBid says it is working with its partners to bring this new IPO experience to issuers and individuals.
“When the FDJ was introduced, tobacconists had a coupon code that allowed them to benefit from a favored allowance. Everything was operational and manual, but this subscription method had not worked. We want to digitize this process to improve our value proposition for a listing in Paris”, explains François De Wiljes.
This innovative value proposition could facilitate the IPO of French unicorns. Last November, the government set itself the objective of listing 10 French unicorns on the stock market by 2025, two of which are valued at 5 billion euros. After a year 2022 marked by a collapse of the IPO market, PrimaryBid intends to answer the government’s call and accompany these companies valued at more than one billion dollars on the way to the stock market. “We want to participate in the voluntary movement of listing French unicorns in Paris. We want them to engage with their community, massively, easily”, adds François De Wiljes.
It remains to be seen whether the new value proposition promoted by the fintech PrimaryBid will unleash the still undecided suitors to embark on the deep stock market.
Sabrina Sadgui – ©2023 BFM Bourse