IPSX warns over ‘material uncertainty’

The company behind the IPSX real estate stock exchange has highlighted “material uncertainty” that could affect its going concern status as its first listing looms. IPSX Group has posted a £4.6m loss for 2019, up from a £2.6m loss a year earlier, according to accounts signed off earlier this month. The exchange, operated by group subsidiary IPSX UK, is hoping to welcome its first listing next month. Mailbox REIT, which will float as the owner of the Mailbox site in Birmingham, said demand for shares has been strong and has delayed the IPO timetable by two weeks to accommodate this. The debut listing has taken longer to appear than company executives had once hoped, although they said the pipeline continues to “grow and progress”. “Market conditions during the financial year were challenging, with considerable uncertainty arising from the Brexit process,” said the company accounts. “Since the year end, the coronavirus pandemic has impacted the global economy and stock markets, and has had a material impact on the real estate sector.” The group has raised £2.7m from investors since the end of 2019, investing an equal amount into IPSX UK. Investors in the business include Mailbox owner M7 and its chief executive Richard Croft alongside a number of other M7 directors, as well as British Land, Henley Investment Management and Dragons’ Den star James Caan. The group has almost £7.4m of cash in the bank and at hand. IPSX UK must hold £3.6m as an operational risk buffer under Financial Conduct Authority rules. IPSX Group said the watchdog has accepted that the subsidiary may want to use that money “in order to continue progressing the business”, but that the FCA has also said the buffer “must be made whole again” ahead of listings. IPSX Group said its board is confident that its investors would “act rationally” in that event and “offer up their financial support”, pointing to an “ability to raise funds from existing investors in the past”. However, the company added that such funding had not been committed at the time its accounts were signed off on 5 October, noting that “the need to raise additional funding… which has not been secured or agreed at the date of approval of these financial statements, represents a material uncertainty that may cast significant doubt on the group’s ability to continue as a going concern…” An IPSX spokesman said: “IPSX has £7m in available capital and is therefore well capitalised. It has funding significantly in excess of the FCA’s regulatory capital requirement to operate as a recognised investment exchange. “A multi-million-pound fund raise was successfully completed in the spring of 2020 and investors continue to be supportive should additional equity be required. IPSX has ample capital to withstand the unlikely scenario of no IPOs taking place until the end of 2021 and to suggest there is any threat to the current IPO process or to the business as a going concern is completely wrong.” IPSX Group has taken several steps to cut costs, according to its accounts, including a hiring freeze, reducing marketing spend and “using current government support schemes, where appropriate”. The group’s staff costs have risen to £3m from roughly £771,000 in 2018, with its highest-paid director earning £252,240. The group said it has tested its business model by modelling a series of “downside cases”, the most severe of which would see no IPOs in either 2020 or 2021. It is expected to announce the outcome of the proposed Mailbox REIT IPO on 3 November. To send feedback, e-mail tim.burke@egi.co.uk or tweet @_tim_burke or @estatesgazette