Following participation in the FCA’s Sandbox initiative in 2018/2019, SquareBook has received regulatory authorisation under Article 25 (2) of the Regulated Activities Order to ‘make arrangements with a view to transactions in investments’. The FCA approval enables SquareBook to provide innovative new services in the Initial Public Offering (IPO) process to benefit firms looking to go public. SquareBook is specifically designed to remove the conflicts of interest inherent in the current book building process - conflicts which affect decisions about who receives allocations of shares and which can also distort the pricing of shares.
Despite the attention generated by mega-deals such as Lyft, Uber and WeWork, the IPO market in both Europe and the USA is in long term decline with the number and value roughly halving over the last 20 years. Much of this trend can be directly attributed to the shortcomings of the current IPO process, which over the years has become increasingly complex, inefficient and opaque. Issuers find the IPO process stifling and unattractive, and both they and investors are increasingly critical of the conflicts of interest that distort share pricing and allocation decisions.
Yet the importance of formal regulated markets has never been greater, and it is widely recognised that any growing economy needs an efficient capital market structure and equity culture in order to support growth.
There is an increasing appetite for change. Large progressive firms such as Slack and Spotify have recently challenged the incumbent IPO market model by pursuing direct listings in order to realise greater shareholder value. They sought an unbundled approach that allowed them to reduce both complexity and cost.
Regulators and policymakers are increasingly critical of an IPO process that is seen as dysfunctional, and which often appears to serve the needs of the financial intermediaries involved rather than the end users of the market. SquareBook believes ambitious entrepreneurs and firms should be free to meet potential investors directly and explore the possibility of using public markets to raise capital, unencumbered by layers of intermediaries who wish to control the process.
Commenting on the FCA approval, Richard Balarkas, Co-Founder of SquareBook, said: “In the last 30 years every aspect of the equities investment life-cycle has been dramatically improved by pursuing policies that promote competition and reduce the barriers to innovation and new services. Yet there has been little or no industry focus on the equity IPO process which is in a state of atrophy. Instead of facilitating capital raising the IPO process itself limits the efficient allocation of capital and ultimately constrains the size and liquidity of the secondary markets.”
“SquareBook aims to dismantle the layers of unnecessary complexity in the IPO process and provide a fresh, modern, efficient means of conducting an equity fund raising on regulated markets.”
Joe Sluys, Co-Founder and CEO of SquareBook, commented: “We have set out to demystify, unbundle and enhance the existing IPO process. We are connecting issuers, investors and intermediaries directly to ensure alignment of long-term interests between firms looking to raise capital on public markets and its investors. By bringing innovation, automation and transparency to the listing process, we empower entrepreneurs considering equity fund raising on public markets to take control over their IPO.”
He added: “We believe that SquareBook will stimulate competition in the IPO process, contribute to a healthy equity culture and economic growth and help return the IPO market to fulfilling its purpose as a source of investment capital for small and growing enterprises.”