London Small-Cap Broker Sees Equity Market Boom in Covid’s Wake

(Bloomberg) -- As London’s biggest small-cap broker Covid-proofs a new headquarters, its top executive expects business to keep booming as companies that benefited from the pandemic -- or need to pay off emergency debts -- seek equity financing. Retail investors’ fad for playing a hot market helps, too.

Sam Smith, whose finnCap Group Plc focuses on the Alternative Investment Market, or AIM, also predicts her staff will never work five days a week in the office again. Smith, 46, is chief executive officer of the 125-person firm that she founded in 2007.

She talked about adapting her business to the pandemic, the future of work and how to relax in lockdown. Her comments have been edited and condensed.

How did the pandemic impact your business?

We took pay cuts. We furloughed 21 people. After the first three months of furlough, we made six staff redundant.

We were expecting a slowdown, but there was a mini-boom -- especially in life sciences and tech, where we have many clients. We raised money one deal after another, and had a record second quarter. July was also good. We will continue to hire.

Do you plan on bringing staff back to the office?

We were slated to fit a new 20,000-square-foot office in April near St. Paul’s Cathedral. I don’t know when we will properly come back, as it has worked very well with every employee working from home since March. Ten to twenty percent of staff surveyed would like to return, especially in the younger age bracket. We are doing a risk assessment to formerly open on Sept. 7.

We had to change our office plan to make it Covid-compliant. We turned it into more of a collaborative space with breakout areas. The purpose of the office is shifting to a hub to meet and be creative. I don’t think anyone is going to be back in the office five days a week at all in the future.

Does that mean cutting office space?

Hot-desking is almost impossible under Covid. If someone is in the office three days per week, they still want to have their own desk. We haven’t cut back on any space. If we start recruiting, we would consider how many days people are doing and whether desk sharing is viable. I suspect we won’t start making these decisions for a year or so.

Home-working, while very good, isn’t viable long term. The future will be very flexible. Will an investor roadshow be done in person again with a fund manager? Interim results on calls save everyone time, people like it, and companies can get on with running their businesses without spending a week in London.

What does the climate look like for IPOs?

We haven’t really had an IPO pipeline for the past 12 months but I’m positive. It’s an asset to be a quoted company with quick access to financing.

Retail investors lured by volatility have driven 25% of trading volumes on AIM this year. Companies like Avacta Group Plc, Synairgen Plc, and Open Orphan Plc are all stocks where we have raised money -- and have seen significant increases in their share prices, as Covid testing and treatments are part of their strategy.

Won’t companies just tap government loans?

We haven’t seen many where CBILS have replaced equity fundraising. If people have short-term debt for a short-term problem, eventually that needs to be refinanced with equity. Debt isn’t a long-term answer, so re-equitizing balance sheets is what’s going to happen. I don’t think it’s anything other than positive for equity markets.

Has the dial shifted for women on boards?

Trying to get 30% of women on boards is all very well, but thinking you’ve done the job by having a few women non-executive directors isn’t the answer. Companies need to look at the management team and whether women are joining or leaving. If you have the right culture, you end up with the right people. We have 40% women now.

If management don’t think the culture needs to change, you won’t ever solve the challenge of female diversity in the workplace, as you pay lip service and it’s uncomfortable for some people to work there.

Has it been challenging rising to the top in a male-dominated industry?

The only thing that was slightly strange was managing much older men as a young female. I was 33 when I first became CEO, and I found that difficult. I had limited role models. If there were more of us, that would make it easier for others to feel more confident.

How do you relax?

My big thing for stress relief is that I love cooking. I always have a wetsuit and bodyboard in the boot of my car and whenever we can my daughter and I go paddle boarding.

©2020 Bloomberg L.P.