GENERALLY speaking, a stock market flotation that makes the mainstream press has the right to call itself ‘high profile’, writes Nick Williams, of Brewin Dolphin. 

You may have noticed that we seem to have had a few truly high profile new listings over the last year and a half.

First, FaceBook took the plunge, as did its shares to begin with. Then, domestically, Royal Mail entered the fray. Latterly, another pre-eminent tech name went public: Twitter.

Recently there has been a notable uptick in companies coming to the market. Indeed the market in new listings seems to be as strong as we’ve seen for some time, although it is worth noting that any recovery has been from a low base. London’s Alternative Investment Market (AIM) saw new listings fall from 462 in 2006 to 71 in 2012 as companies focussed on survival first.  It would appear that companies are discussing growth plans once again.

Behind the scenes and away from the relative glitz of the high profile listings, there have been many more new entrants to the public domain. Importantly, they seem to be in more economically-sensitive sectors. Property agent Foxtons and house builder Crest Nicholson are 2013 stock market debutants, and Miller Group, another builder, is considering joining them.

Initial Public offerings (IPOs) and mergers and acquisitions are generally seen as an indicator of economic confidence so this increase in corporate activity could signal a pick up in the economy.

Naturally, the principal reason for a company to list for the first time on the stock market is to raise finance to grow the business. Owners will give up part of their ownership for the chance to reach new levels, and there is a far greater chance of demand for their product or service in a buoyant economy.

But there are other benefits from going to the market. The mere act of listing can generate the sort of publicity that gives a company penetration into areas which they could never otherwise have reached. This is particularly pertinent for internet stocks, whose ability to generate revenues rely on huge volumes of users who don’t necessarily need to be wealthy to use their product.

IPOs bring out two broad types of people: speculators and investors. The speculators hope for a quick buck as shares soar in the hours or days immediately following the listing; the investors are seduced by the long term potential of the business.

Although a lot of IPOs generate huge interest and buying pressure can initially drive up the share price, stellar performance in the early days doesn’t guarantee lasting success in same way poor initial performance doesn’t see the company doomed forever as a public entity.

What it can indicate, though, is an endorsement by the wider public of the quality of the underlying business and (probably more so with smaller companies), the potential of the concept. Which brings me closer to home.

Two of our own companies have come to the AIM market this autumn, both having been spun out of Durham University at different times. Maker of imaging and detection technology, Kromek Group, based at Sedgefield, has performed well since its mid-October debut. Its technology is applied in airport security, medical imaging and nuclear detection. Technology for a modern world.

And last week, Wilton-based Applied Graphene Materials also floated. The company sold its shares at 155p and at the time of writing they were trading at over 450p. Graphene is being termed a new ‘wonder-carbon’, with potential uses in making batteries last longer, and planes lighter, amongst others. It is the strongest, thinnest yet most impermeable material in the known world and Applied Graphene have found a way of producing it on a commercial scale.

So, to take one example, the structural integrity of the airliner in which you fly, and its security, could be ensured by firms based on your doorstep. Corporate confidence in the economy is a good sign; this innovation in our area is a great one.

Nick Williams is an Assistant Director at Brewin Dolphin and offers advice on a wide range of financial services to private clients, trusts, charities and pension funds.  

Past performance is not an indication of future performance. The value of any investment and any income can fall and you may get back less than you invested. No investment is suitable for all people and should you have any doubts you should consult an authorised financial adviser.

The information contained in this article has been taken from public sources and is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness. The opinions expressed in this article are not necessarily the views held throughout Brewin Dolphin Ltd. No Director, representative or employee of Brewin Dolphin Ltd accepts liability for any direct or consequential loss arising from the use of this document or its contents.