Are innovative green energy companies undervalued?
Markets have always been volatile and uncertain, but the COVID-19 crisis has reminded us just how unpredictable they can be. The energy sector has certainly not been immune, with efforts towards a greener future and net-zero targets building momentum. Alongside building back better following the pandemic, energy investment is a hot topic.
Despite fluctuations in the market, energy companies haven’t been deterred from moving towards public listings. A trend for IPOs has seen many high-profile organisations float on public markets in recent years, all to varying successes, raising a key question - as the industry works tirelessly towards a smarter future, why does it still choose to access capital in the traditional way?
A good example is Grupo Ecoener. The renewable energy company’s shares dropped 15% on the first day of trading after failing to spark investor interest. This had a drastic knock-on effect and in response, the Spanish wind and solar developer, Capital Energy, and renewable energy company, Opdenergy Holding SA, decided against their scheduled IPOs. Both cited challenging market conditions and the volatility around green stocks, yet with impactful missions and strong values, the expectation would be to see better returns. The traditional route to company exits is changing.
Historically, IPOs and company buyouts have been seen as the only effective ways to create liquidity, but research conducted for our latest report found that more than half (56%) of UK utilities and manufacturing companies were able to raise as much, or more, private finance than planned last year. Additionally, two-thirds (60%) cite failed IPOs as the main reason why they are holding off on going public themselves, proving that trust in the overall process is flailing – just like Capital Energy and Opdenergy Holding SA.
As more companies move through the IPO process, we'll see more failed listings. But it's not the company's fault, it's the process itself. It’s time they empowered themselves and took control.
Forward-thinking energy companies should be looking at alternatives that allow them to manage their own capital raises to a sophisticated and institutional investor base. Technology solutions now provide the ability to access private capital on a wider scale, targeting specific investor groups and like-minded individuals that truly understand the value proposition of a company, ultimately creating a different – and direct – type of investor demand from that of the public market.
By accessing private capital more effectively, closing the gap on investment opportunities in the sector is more straightforward than ever, creating a completely new way to attract real value from enlightened investors.
Alexander Green is Chief Evangelist and Co-Founder at Globacap, which uses emerging blockchain technology to change the underlying processes behind private capital markets
