Hi-tech PR: Text cites stability as flotation motivation - Text 100’s flotation on the OFEX market next month will open the door for other medium-sized companies. Therefore, say other hi-tech PR agencies, it must not fail

When Text 100 revealed last week it was going public, the news hardly set the City of London alight. None of the national newspapers reported the forthcoming OFEX float and when asked, few media or smaller company analysts had even heard of the agency. Nor should they have. In a market that classes a small company as worth anything up to pounds 250 million, Text’s market capitalisation of pounds 6 million makes it comparative small fry.

When Text 100 revealed last week it was going public, the news

hardly set the City of London alight. None of the national newspapers

reported the forthcoming OFEX float and when asked, few media or smaller

company analysts had even heard of the agency. Nor should they have. In

a market that classes a small company as worth anything up to pounds 250

million, Text’s market capitalisation of pounds 6 million makes it

comparative small fry.



More significant are the motives behind the float and the message it

gives to the rest of the hi-tech PR industry.



Text’s chairman Tom Lewis - who founded the agency along with mainland

Europe managing director Mark Adams in 1981 - insists that the primary

motivation is to incentivise, reward and retain employees. His rationale

is that staff who are awarded shares through the company’s own employee

share ownership plan or who buy them on OFEX will be able to track their

value on a daily basis and participate more keenly in the development of

the business.



’One problem which an agency of our size faces is how to create

stability in a business that relies on its people,’ says Lewis. ’If

people don’t invest sufficient resources to meet the needs and

aspirations of their staff then they will lose out. We want to be able

to offer senior people some serious capital gain.’



Industry observers are more cynical. After all, the shares in Text’s

employee scheme account for about five per cent of the company’s stock

and these are already split between 22 members. Just four per cent of

the 20 million shares released on the market on 11 March will be

available to buy. Fifty per cent remains in the hands of the two

founders with the other six directors holding the rest.



Furthermore, OFEX is a trading facility which operates on a matched

bargain basis rather than as an open market - whereby those wishing to

sell shares in an OFEX-listed company must first secure a buyer to do

so, and vice versa. If Text was really serious about incentivising staff

why didn’t it simply release more shares into the employee share scheme

or extend profit-related pay?



’The talk about motivating staff is the one bit of their argument that

is a bit flakey,’ says one agency chief and former Text employee. ’I

think it has more to do with getting outside investors involved because

they have plans for global expansion. The directors also have more

freedom to sell their shares if they want to leave. Staff retention was

always a problem at Text and it has more to do with management and

motivation than share ownership.’



Whatever the reasons behind it, Text’s move marks a coming of age for

the hi-tech PR industry, which has traditionally been seen as a niche

area. With the exception of Miller/Shandwick Technologies - part of

Shandwick International - no other IT agency is currently quoted.



Inevitable criticisms aside, even Text’s competitors have welcomed the

float for the enhanced status it will bring to the sector. ’It’s a

demonstration of technology PR becoming mainstream and shows that we are

now thinking and working globally,’ says A Plus managing director Mike

Copland. GBC director Gill Coomber agrees: ’It opens the door to other

medium-sized companies to float, and in a way the future rides with

companies like Text to show the way and get it right.’



However, the question remains: who is going to buy the 800,000 shares

which Text has released to outside investors - a tiny amount for a first

time float. Lewis admits that Text’s financial advisers, ARM Corporate

Finance, pressured the company to put more shares on the market but that

its directors were reluctant to release a large part of their

equity.



The four per cent handed over by Lewis and Adams will, he says, at least

ensure a perceptible degree of price movement.



Alan MacKenzie, managing director of ARM Corporate Finance, believes the

offer will attract professional investors with an eye for specialist

firms.



’Text is well represented in the IT field, which is regarded as a strong

growth area, and the company is set to expand its presence in Europe and

the rest of the world,’ he says, adding that staff, clients and

investment specialists following the PR and marketing sectors will also

take interest.



But others doubt the long term viability of publicly quoted PR companies

in any sector. ’The jury is still out on the benefits of floating,’ says

the head of one medium-sized financial consultancy. ’Companies based on

people are not good long-term investments. Investors look for continuing

growth and increasing dividends every year and there’s very little

understanding of the cycles experienced by people-based businesses.’



LISTED PR CONSULTANCIES

Company                      floated   market      market cap

Shandwick International     Oct 1985      LSE    pounds 78.5m

City of London PR          June 1988      LSE     pounds 6.6m

Chime Communications       June 1995      LSE      pounds 22m

Citigate Communications   March 1997      LSE      pounds 50m

Text 100                  March 1997     OFEX       pounds 6m

Key: OFEX: Off Exchange, LSE: London Stock Exchange



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