Capital Spreads in £33m flutter, Matthew Goodman, Sunday Times
December 11, 2005admin No Comments »Spread Betting firm
Capital Spreads is placing its bets on a £33m flotation. Its parent company, London Capital Group, has appointed stockbroker Evolution Securities to advise it on a listing on the Alternative Investment Market.
The float comes just a few months after the business was bought by its management from London Capital Partners.
London Capital Group is owned by chief executive Frank Chapman, chief operating officer Simon Denham and sales and marketing director Rachel Brownlow. The latter two, formerly with rival firm Cantor Index, set up
Capital Spreads just over two years ago.
Following the flotation, which is expected to take place before Christmas, they will hold 55% of the shares. They hope to raise £15m from the placing of a 45% stake.
Chapman said that one reason for the listing was to swap the debt used to fund the buyout for equity. “We wanted the business to be debt-free,” he said.
Funds will also be invested to develop new products and to grow internationally.
Chapman said the prospects for a listing were particularly bright given the good run enjoyed by shares in its larger rival IG Group, which floated in May.
The apparent recovery of Party Gaming shares after it warned in September of slowing growth had also helped London Capital Group’s prospects, added Chapman. “There is a window at the moment,” he said.
As well as its spread-betting operation, London Capital Group runs a foreign-exchange dealing service and has a derivatives broking arm. It also offers a sports spread-betting site via a partnership with Sporting Index and provides a “white label” service for third parties wanting to offer financial spread betting.
It is estimated that there are 1m active spread-betting traders in the UK.
Capital Spreads aims to appeal to the casual punter as well as more professional traders.
Don’t bet on it
A colourful insert falls out of the Financial Times. It is from Capital Spreads, yet another City spread-betting firm, and is titled “Learn To Spread Bet”. It contains the extraordinary phrase “You do not need to be an experienced investor to spread bet.”
The Financial Services Authority has already fined two firms for failing to warn consumers adequately of the danger from this sort of gambling in their promotional literature.
Most in the City reckon spread betting, where the downside risk can be unlimited, is only for the sophisticated punter. Simon Denham, managing director of Capital Spreads, insists that the FSA is happy with his ad, which does mention the “high level of risk” involved, and says spread betting can even help to train market professionals. “Spread betting, oddly enough, is allowed by the FSA as experience in foreign exchange trading.”
He admits the ad has ruffled feathers among his rival bookies — one was particularly indignant. By coincidence, Capital Spreads yesterday announced plans to float on AIM.
The FSA assures me: “We don’t pre-vet or approve financial promotions. As you’ve brought it to our attention, we will look at it.”
Join the discussion