‘Smaller UK public companies, typically those below £100m in size, face many barriers to accessing growth capital from the stock market. Poor liquidity results in these companies being perceived as private companies with a quote’.
This is the headline of a note published recently by Gresham House plc, a specialist asset manager. The key reasons include the increasing regulatory burden, making it harder for pension funds, institutions and wealth managers to invest in smaller companies; 'impatient' capital and shorter holding periods placing a premium on ability to sell at short notice; and reduced sell-side capacity and research coverage restricting capital flow (primary and secondary) resulting in greater pricing dislocations and inefficiencies.
- ‘Savvy’ investors can exploit these inefficiencies to generate superior returns
- Specialist institutional investors with longer term strategies and retail investors who stock pick
- Brokers are going to produce a lot less research (and retail investors cannot read it anyway!)
We are grateful to Gresham House for allowing us to reproduce their note in full.