The AIM market has another player joining its ranks this week, following the successful IPO of Australian consumer health food company, Wellnex Life [LON:WNX].
The Melbourne-based food supplement company debuted on the market on Friday (21st March). Wellnex is already a constituent of the Australian Stock Exchange, trading under the ticker [ASX:WNX], and raised £5.22m before expenses through the IPO.
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Wellnex develops, licences, markets and distributes its own-brand of topical painkillers, energy products, sleep-aid supplements, nutritional supplements and oral hygiene products to retailers and wholesalers in the UK and Australia.
Founded in 2011, Wellnex listed on the ASX in 2017, under its original name, Wattle Health, before changing-name to Wellnex in 2021.
The placement was of 10.4 million shares on AIM, representing 24.8% of issued share capital on admission. Wellnex also placed 6 million shares in Australia, giving Wellnex a market cap of £21m on issue at the admission price.
UK institutional support for the IPO
Wellnex’s IPO was supported by subscriptions from UK institutional investors, Premier Miton and Pentwater Capital, who post-admission will each now own 4.76% of Wellnex’s issued share capital.
Strand Hanson acted as Nomad, and SP Angel and Orana Corporate acted as joint brokers. In Australia the issue was supported by Barclay Pearce Capital Management and Reach Markets, who acted a co-lead managers.
Wellnex’s management decided that the IPO, and greater visibility it provides, would accelerate the development process of new products and speed their route to market, as well as open new opportunities for Wellnex in international markets.
The company has bolstered its war chest by £5.56m when the IPO and Australian rights issue is combined, and the funds are being used to pay off the deferred consideration in respect of the Wellnex’s acquisition of Pain Away – the company’s topical pain relief brand acquired in December 2023 – the repayment of the outstanding balance of its convertible notes, following the application of A$2.19m of notes in subscription for ordinary shares at the issue price, and for working capital purposes to drive international expansion.
Wellnex is clearing its debt
The IPO allowed Wellnex to clear all its debt from its Pain Away acquisition, paid off its convertibles in total cancelling A$13m in debt, and making A$1.4m in savings per year. The company also launched a retail offer to raise a further £300,000, which will close on Wednesday (26th March).
Wellnex’s IPO will come as a welcome shot in the arm for the AIM market, which has been in a bit of a slump for the past few years. The number of IPOs on AIM has been exceptionally low, reaching some of the lowest figures since the market’s inception. There are now just 680 companies left on AIM, following Wellnex’s listing. This is its lowest since 2001 and is a dramatic shrink from the market’s peak in 2007 when 1,694 companies were listed on the exchange; in the last year, 11 firms left the market and the remaining constituents grumble about the market’s excessive red tape and bureaucracy, cost burdens, a lack of liquidity and the ability to raise new capital through the market.
Why list on AIM?
The bigger picture, with increasing concerns about the health of the UK economy, is also dissuading potential private companies looking to become PLCs from considering AIM, and the glister of North American markets has proved to be a greater lure to international companies looking for a window on the world than the UK’s junior stock exchange.
It’s not looking great for AIM – and to an extent the FTSE – at the moment. An obvious rescue plan for AIM, but one that will take a level of political will that is scarce currently, is to change the investment mindset of the UK public and get them involved in the growth story of mid-sized UK companies.
In the United States, a majority of normal joes are invested in the stock market. There is a culture of investment, especially in equities, that doesn’t exist in the UK. The UK markets are still dominated by institutional investors, and these investors have the systems, advice and capital to invest anywhere in the world. If overseas equity markets, or corporate debt, or derivates are better value than AIM or the FTSE, that’s where their money will go. Most UK pensions funds, which exist primarily for the benefit of UK taxpayers and are manged by UK-domiciled companies, invest the majority of their assets overseas, or at the very least outside AIM.
Retail investors could be the key for a resurrection of AIM, but the government and the financial services sector must collaborate on incentivising British ordinary joes to support primarily UK-domiciled companies, employing British workers, to grow (and don’t forget the current government has ‘Growth Tourette’s’ mentioning the need for economic growth in almost every sentence) through supporting investment into AIM, and other stock markets like Aquis.
At the moment that scenario seems a distant dream.
