1 00:00:00,160 --> 00:00:02,960 Speaker 1: We Soda has sent a shockwave across the London market 2 00:00:02,960 --> 00:00:06,200 Speaker 1: by canceling what could have been the capital's largest IPO 3 00:00:06,320 --> 00:00:09,320 Speaker 1: in two years, just two weeks after it was announced. 4 00:00:09,520 --> 00:00:12,760 Speaker 1: The company, which is backed by the Turkish industrial conglomerate 5 00:00:12,880 --> 00:00:17,480 Speaker 1: Sinner Group, cited extreme investor caution as the reason. And 6 00:00:17,520 --> 00:00:19,920 Speaker 1: I'm very pleased to welcome the CEO of WE Soda, 7 00:00:20,000 --> 00:00:23,239 Speaker 1: Alistair Warren. Good morning, Alistair morning. So you're in the 8 00:00:23,280 --> 00:00:26,000 Speaker 1: studio with us this morning. I wonder whether you've come 9 00:00:26,040 --> 00:00:28,400 Speaker 1: here to tell listeners that you made a mistake. 10 00:00:28,920 --> 00:00:32,159 Speaker 2: No, not at all. I mean I think that you know, 11 00:00:32,240 --> 00:00:35,080 Speaker 2: if you look at the things we did achieve. We 12 00:00:35,880 --> 00:00:38,800 Speaker 2: engage with three hundred investors all over the world, not 13 00:00:38,840 --> 00:00:41,520 Speaker 2: only in the UK, Europe and the US. I don't 14 00:00:41,520 --> 00:00:43,920 Speaker 2: think there's anybody in the business community now that doesn't 15 00:00:43,920 --> 00:00:47,240 Speaker 2: know who WE Soda is, and most importantly, people understand 16 00:00:47,240 --> 00:00:49,720 Speaker 2: what soda USh is and before we started, frankly, very 17 00:00:49,720 --> 00:00:52,600 Speaker 2: few people did. So in that sense, mission accomplished. Of course, 18 00:00:52,600 --> 00:00:54,880 Speaker 2: it's disappointing that we couldn't get an IPO done, but 19 00:00:55,240 --> 00:00:56,920 Speaker 2: you know, there are some positives that come out of this. 20 00:00:57,360 --> 00:00:58,120 Speaker 3: What went wrong? 21 00:00:59,080 --> 00:01:02,000 Speaker 2: I think that The issue wasn't about breadth of engagement, 22 00:01:02,000 --> 00:01:04,640 Speaker 2: as I've said three hundred institutions, but I think what 23 00:01:04,680 --> 00:01:07,120 Speaker 2: we're experiencing in Europe, and I mentioned it in the 24 00:01:07,160 --> 00:01:11,000 Speaker 2: release yesterday, this view on extreme sort of valuation caution 25 00:01:11,560 --> 00:01:13,560 Speaker 2: and what does that mean. So typically on an IPO 26 00:01:13,640 --> 00:01:17,160 Speaker 2: you have a fifteen twenty percent IPO discount to fair value. 27 00:01:17,640 --> 00:01:22,120 Speaker 2: When that IPO discount doubles, then as a company, particularly 28 00:01:22,120 --> 00:01:23,640 Speaker 2: if you don't need the money, you've got a question 29 00:01:23,680 --> 00:01:25,840 Speaker 2: does that make sense? And that was really the decision 30 00:01:25,840 --> 00:01:28,800 Speaker 2: that we took because the extreme investor caution, the fear 31 00:01:29,600 --> 00:01:33,720 Speaker 2: over this IPO market and the aftermarket performance really drove 32 00:01:33,840 --> 00:01:35,280 Speaker 2: valuations to such a low level. 33 00:01:35,720 --> 00:01:38,520 Speaker 1: The Ft Reports though that a person familiar with the 34 00:01:38,560 --> 00:01:42,920 Speaker 1: matter told them that senior executives at companies had mishandled 35 00:01:42,920 --> 00:01:47,720 Speaker 1: the discussions with investors and that compounded concerns about management 36 00:01:47,800 --> 00:01:51,240 Speaker 1: holding zero shares in the group. That's the ft reporting. 37 00:01:51,520 --> 00:01:53,120 Speaker 1: Want to put that line to you. 38 00:01:53,440 --> 00:01:55,280 Speaker 2: Yeah, I mean, I actually don't know where that one 39 00:01:55,320 --> 00:01:58,480 Speaker 2: has come from. It is indeed true that management don't 40 00:01:58,480 --> 00:02:01,680 Speaker 2: hold shares in the company, but it's also true consistent 41 00:02:01,720 --> 00:02:06,120 Speaker 2: with other UK public companies that you know, our short 42 00:02:06,160 --> 00:02:09,960 Speaker 2: term and long term incentives were largely composed of share 43 00:02:10,200 --> 00:02:14,560 Speaker 2: based remuneration and with a view that all senior executives 44 00:02:14,560 --> 00:02:17,720 Speaker 2: would accumulate a meaningful shareholding, you know, earned by way 45 00:02:17,760 --> 00:02:20,959 Speaker 2: of bonus and compensation over time. So but I don't 46 00:02:21,000 --> 00:02:24,040 Speaker 2: really understand that the point that was made because certainly 47 00:02:24,080 --> 00:02:26,880 Speaker 2: in all the meetings that I did, I think that 48 00:02:26,960 --> 00:02:30,200 Speaker 2: was that question was asked once in one meeting out 49 00:02:30,240 --> 00:02:32,920 Speaker 2: of you know, sixty or seventy meetings. So I think 50 00:02:32,960 --> 00:02:36,200 Speaker 2: that that's a line that the FT's chosen to write, 51 00:02:36,200 --> 00:02:38,200 Speaker 2: But I don't think it's it's actually reflective of the 52 00:02:38,200 --> 00:02:39,000 Speaker 2: real dialogue. 53 00:02:39,080 --> 00:02:43,120 Speaker 3: When you talk about the valuation being unrealistically low, what 54 00:02:43,240 --> 00:02:46,079 Speaker 3: sort of discounter were you looking ats. 55 00:02:46,639 --> 00:02:49,400 Speaker 2: So if you think about this, this is a company 56 00:02:49,480 --> 00:02:52,280 Speaker 2: that last year generated seven hundred and forty one million 57 00:02:52,320 --> 00:02:55,600 Speaker 2: dollars of cash. We committed at IPO for twenty twenty 58 00:02:55,639 --> 00:02:58,639 Speaker 2: three to pay to all shareholders, including the new shareholders, 59 00:02:59,120 --> 00:03:01,480 Speaker 2: at least a five million dollar dividends. So that gives 60 00:03:01,480 --> 00:03:05,000 Speaker 2: you a strong sort of view on dividend yield. And 61 00:03:05,200 --> 00:03:08,640 Speaker 2: you know, typically you'd expect companies like this to you know, 62 00:03:08,720 --> 00:03:13,000 Speaker 2: trade at six to seven percent dividend yields when that doubles, right, 63 00:03:13,400 --> 00:03:16,919 Speaker 2: so effectively you know the discount is fifty percent. Then 64 00:03:16,919 --> 00:03:19,800 Speaker 2: you've got a question, you know, is that first of all, 65 00:03:19,840 --> 00:03:21,840 Speaker 2: is it reflective of the business or is it reflected 66 00:03:21,880 --> 00:03:24,480 Speaker 2: of market fear? And does it make any sense? Because 67 00:03:24,520 --> 00:03:26,720 Speaker 2: in many ways it almost asks as many questions over 68 00:03:26,760 --> 00:03:29,200 Speaker 2: the business as it answers And it was on that 69 00:03:29,320 --> 00:03:31,240 Speaker 2: basis and as as I say, because we didn't need 70 00:03:31,280 --> 00:03:33,120 Speaker 2: the money, we just thought that sends the wrong message. 71 00:03:33,120 --> 00:03:33,880 Speaker 2: We're going to withdraw. 72 00:03:34,480 --> 00:03:37,720 Speaker 1: Okay, So what is the problem then with investors looking 73 00:03:37,760 --> 00:03:40,120 Speaker 1: at the London market? Why did they Why do you 74 00:03:40,480 --> 00:03:42,680 Speaker 1: feel that they made you know what you're saying up, 75 00:03:42,680 --> 00:03:45,080 Speaker 1: some drew some pretty strange conclusions. 76 00:03:45,760 --> 00:03:47,680 Speaker 2: By the way, I don't think this is specific to 77 00:03:47,720 --> 00:03:50,800 Speaker 2: the London market, right. This is a phenomenon that is 78 00:03:51,160 --> 00:03:54,800 Speaker 2: similar across the all European markets today. And I draw 79 00:03:54,880 --> 00:03:57,640 Speaker 2: that by comparison to North America because whilst the North 80 00:03:57,640 --> 00:04:01,080 Speaker 2: American IPO market isn't straightforward either, it's somewhat more constructive 81 00:04:01,880 --> 00:04:03,960 Speaker 2: and I think it comes down to the willingness of 82 00:04:04,000 --> 00:04:07,560 Speaker 2: investors to do the real fundamental research and have conviction 83 00:04:08,360 --> 00:04:11,520 Speaker 2: around that as opposed to following everybody else. And I 84 00:04:11,560 --> 00:04:14,520 Speaker 2: think there's such a breadth of different investment styles. In 85 00:04:14,560 --> 00:04:16,640 Speaker 2: North America you can find a larger group of people 86 00:04:16,640 --> 00:04:19,159 Speaker 2: that do have that conviction. And in Europe, I think 87 00:04:19,200 --> 00:04:23,800 Speaker 2: that people have been so damaged by IPOs over the 88 00:04:23,880 --> 00:04:26,360 Speaker 2: last two years in terms of their aftermarket performance. They're 89 00:04:26,440 --> 00:04:28,840 Speaker 2: just extremely cautious. So they've taken the view there's lots 90 00:04:28,880 --> 00:04:30,440 Speaker 2: of value else where, we don't need to do this. 91 00:04:30,720 --> 00:04:32,280 Speaker 2: If we are going to do it, we're only going 92 00:04:32,320 --> 00:04:33,159 Speaker 2: to do it at low value. 93 00:04:33,240 --> 00:04:34,960 Speaker 3: So it's that say that you don't think there's risk 94 00:04:35,000 --> 00:04:36,560 Speaker 3: appetized from your opinion at yes, I. 95 00:04:36,480 --> 00:04:39,279 Speaker 2: Think there is risk appetite, but it's been de risked 96 00:04:39,720 --> 00:04:42,680 Speaker 2: to such an extent. You know, discount over discount over discount, 97 00:04:42,920 --> 00:04:45,640 Speaker 2: you reach the point where there's a mismatch between what 98 00:04:45,760 --> 00:04:48,279 Speaker 2: the market's prepared to pay and what actually makes sense 99 00:04:48,520 --> 00:04:51,720 Speaker 2: from a company's perspective. And I think that's eventually what 100 00:04:52,560 --> 00:04:53,560 Speaker 2: you know, where we ended up. 101 00:04:54,440 --> 00:04:59,920 Speaker 1: It's depressing reading really and it will worry the UK gov. 102 00:05:00,200 --> 00:05:05,080 Speaker 1: And you know, the government really seen the chances Jeremy Hunt. 103 00:05:05,120 --> 00:05:08,120 Speaker 1: They have been very keen to stress how market friendly 104 00:05:08,440 --> 00:05:11,640 Speaker 1: this administration is how business friendly they are? What could 105 00:05:11,640 --> 00:05:13,960 Speaker 1: they do to prevent this from happening again. 106 00:05:14,320 --> 00:05:17,040 Speaker 2: So we have no issue at all with the UK, 107 00:05:17,160 --> 00:05:20,600 Speaker 2: and I agree they are market friendly and supportive. But 108 00:05:20,880 --> 00:05:23,440 Speaker 2: I don't think this is a government issue to resolve. 109 00:05:23,680 --> 00:05:26,159 Speaker 2: I think this is a market issue to resolve. I 110 00:05:26,240 --> 00:05:29,240 Speaker 2: do think there is, you know, some issues broadly within 111 00:05:29,279 --> 00:05:32,640 Speaker 2: financial services in terms of sort of the optimization of 112 00:05:32,640 --> 00:05:35,560 Speaker 2: financial services. So very few people want to do fundamental 113 00:05:35,839 --> 00:05:38,599 Speaker 2: work to understand businesses. But I don't think this is 114 00:05:38,640 --> 00:05:41,640 Speaker 2: one that regulation can solve. It's on the margin, it's 115 00:05:41,640 --> 00:05:42,120 Speaker 2: not the core. 116 00:05:42,760 --> 00:05:45,360 Speaker 3: Does that mean then that your next step is to 117 00:05:45,360 --> 00:05:46,560 Speaker 3: look for a listing in the US. 118 00:05:46,800 --> 00:05:48,880 Speaker 2: So our next step is to focus back on business 119 00:05:48,880 --> 00:05:51,240 Speaker 2: as usual. Right, We've spent you know, of the last 120 00:05:51,279 --> 00:05:51,760 Speaker 2: eighteen months. 121 00:05:51,839 --> 00:05:52,680 Speaker 3: You're a new found fame. 122 00:05:54,680 --> 00:05:57,280 Speaker 2: No, we spent most of the last eighteen months focusing 123 00:05:57,320 --> 00:05:59,920 Speaker 2: on an IPO and there's a lot of growth project 124 00:06:00,040 --> 00:06:02,000 Speaker 2: we've got to execute. We've got three one in Turkey, 125 00:06:02,040 --> 00:06:03,960 Speaker 2: two in North America, and we've got a lot of 126 00:06:04,000 --> 00:06:06,840 Speaker 2: commercial projects. Frankly, we discussed with the board yesterday and 127 00:06:06,839 --> 00:06:09,279 Speaker 2: that's where we're going to focus as and when market 128 00:06:09,400 --> 00:06:11,600 Speaker 2: conditions improved, we might think of a listing again, and 129 00:06:11,839 --> 00:06:13,600 Speaker 2: then we'll have to consider where we go. But for now, 130 00:06:13,640 --> 00:06:15,000 Speaker 2: it's back to business as usual. 131 00:06:15,120 --> 00:06:16,600 Speaker 1: So we're not going to turn around and find that 132 00:06:16,680 --> 00:06:19,080 Speaker 1: you're going for New York listing, let's say, by the 133 00:06:19,200 --> 00:06:19,720 Speaker 1: end of this year. 134 00:06:19,800 --> 00:06:21,560 Speaker 2: No, And the reason for that is we always made 135 00:06:21,600 --> 00:06:24,800 Speaker 2: it clear this was just one step in a long journey. 136 00:06:24,920 --> 00:06:27,839 Speaker 2: We didn't need the money. We've got plenty of capital, 137 00:06:28,640 --> 00:06:30,840 Speaker 2: you know, a very lowly levered bounce sheet. We can 138 00:06:31,279 --> 00:06:33,320 Speaker 2: afford to fund all our growth, and that's what we're 139 00:06:33,320 --> 00:06:34,840 Speaker 2: going to focus on now going forward. 140 00:06:34,960 --> 00:06:38,320 Speaker 3: What is this effort cost you to put that preparity 141 00:06:38,360 --> 00:06:40,200 Speaker 3: work that you're talking about into an IPO and then 142 00:06:40,400 --> 00:06:41,040 Speaker 3: not go through. 143 00:06:40,920 --> 00:06:43,400 Speaker 2: With those Yes. So obviously the most of the fees 144 00:06:43,400 --> 00:06:47,440 Speaker 2: associated with an IPO actually come upon success because they're 145 00:06:47,480 --> 00:06:50,440 Speaker 2: there the banking underwriting fees. Of course, there's legal fees 146 00:06:50,480 --> 00:06:52,760 Speaker 2: and consultant fees and what have you. But actually I 147 00:06:52,800 --> 00:06:55,320 Speaker 2: would look at it like this and say, in going 148 00:06:55,400 --> 00:06:58,160 Speaker 2: through this process, what has it done in terms of 149 00:06:58,240 --> 00:07:00,920 Speaker 2: improving the business, improving the way in which we think 150 00:07:00,960 --> 00:07:04,960 Speaker 2: about the business, how we think about our disclosures and 151 00:07:05,080 --> 00:07:07,200 Speaker 2: that's something that we're committed to do, even as a 152 00:07:07,240 --> 00:07:10,160 Speaker 2: private company, So we don't consider it as a lost investment. 153 00:07:10,200 --> 00:07:13,120 Speaker 2: We just consider it an improvement in our business that 154 00:07:13,240 --> 00:07:14,680 Speaker 2: will last for many years to come. 155 00:07:15,280 --> 00:07:18,600 Speaker 1: What would be your message then, to institutional investors. I mean, 156 00:07:18,640 --> 00:07:23,000 Speaker 1: I hear the do your research line, but what would 157 00:07:23,080 --> 00:07:26,800 Speaker 1: be your message to institutional investors at this point? 158 00:07:27,200 --> 00:07:29,800 Speaker 2: I mean, I guess my frustration is that if you've 159 00:07:29,840 --> 00:07:33,720 Speaker 2: got a company which is a global leader, strongly cash backed, 160 00:07:34,080 --> 00:07:38,160 Speaker 2: strong growth, strong dividend, strong sustain like best in class 161 00:07:38,160 --> 00:07:42,440 Speaker 2: sustainability credentials, it ticks every box in theory. So if 162 00:07:42,520 --> 00:07:46,240 Speaker 2: this doesn't work, what does work? And so I think 163 00:07:46,280 --> 00:07:50,000 Speaker 2: people need to you know, given that IPOs are fundamental 164 00:07:50,800 --> 00:07:54,320 Speaker 2: to the sustaining capital markets, you know, bringing new companies 165 00:07:54,360 --> 00:07:56,600 Speaker 2: and new ideas to the market. They've really got a 166 00:07:56,680 --> 00:07:59,360 Speaker 2: question whether you know their current approach is the right approach, 167 00:07:59,520 --> 00:08:02,280 Speaker 2: and because otherwise, I think a lot of companies will 168 00:08:02,280 --> 00:08:04,800 Speaker 2: be turned off and go to private equity or private 169 00:08:04,840 --> 00:08:06,560 Speaker 2: capital formation as an alternative. 170 00:08:07,800 --> 00:08:11,800 Speaker 3: Is there there's nothing that the institution of the investors 171 00:08:11,840 --> 00:08:14,360 Speaker 3: that you spoke to in these engagements, there were no 172 00:08:15,160 --> 00:08:17,040 Speaker 3: issues beyond the fact that you feel they didn't they 173 00:08:17,040 --> 00:08:19,120 Speaker 3: didn't see the promise that you see in the business. 174 00:08:19,200 --> 00:08:22,360 Speaker 3: There's another chance that they just found something that in 175 00:08:22,440 --> 00:08:25,000 Speaker 3: the business that led them to not want to give 176 00:08:25,080 --> 00:08:26,640 Speaker 3: the valuation that you saw of the business. 177 00:08:27,040 --> 00:08:29,600 Speaker 2: I don't think so. You know, there was a broad 178 00:08:29,720 --> 00:08:33,480 Speaker 2: range of investment styles growth yield, emerging markets, develop markets. 179 00:08:33,720 --> 00:08:35,560 Speaker 2: Of course, they all have their own area of focus. 180 00:08:36,360 --> 00:08:38,439 Speaker 2: I think that the first challenge for us was to 181 00:08:38,600 --> 00:08:40,440 Speaker 2: educate people on the industry, because it's not a well 182 00:08:40,520 --> 00:08:43,160 Speaker 2: understood industry. I think we did that. Then it was 183 00:08:43,200 --> 00:08:46,360 Speaker 2: to educate them on the you know, operational and financial 184 00:08:46,440 --> 00:08:49,959 Speaker 2: competitive advantages we had and the sustainability of those. I 185 00:08:50,040 --> 00:08:53,760 Speaker 2: think there people understood the advantages, but they struggled with 186 00:08:53,920 --> 00:08:56,040 Speaker 2: how sustainable they are in the future, and as a 187 00:08:56,120 --> 00:08:58,880 Speaker 2: result then they kind of start to lair. When you 188 00:08:58,960 --> 00:09:02,360 Speaker 2: combine that with the fear factor that I described over 189 00:09:02,520 --> 00:09:05,880 Speaker 2: market performance, then that then compounds to the valuation outcome 190 00:09:05,920 --> 00:09:07,360 Speaker 2: that we got. But I don't think there were specific 191 00:09:07,440 --> 00:09:08,520 Speaker 2: issues on that on the company. 192 00:09:08,920 --> 00:09:10,840 Speaker 1: Just lastly, I mean, you were you had been hoping 193 00:09:10,880 --> 00:09:13,679 Speaker 1: to raise eight hundred million dollars i e evaluation of 194 00:09:13,760 --> 00:09:15,959 Speaker 1: seven and a half billion dollars. Do you stick to 195 00:09:16,040 --> 00:09:18,000 Speaker 1: that now? You think that perhaps if you come back 196 00:09:18,040 --> 00:09:20,360 Speaker 1: to market, it would be bigger than that, stronger than that. 197 00:09:21,160 --> 00:09:23,360 Speaker 2: I always said there would never be a cheaper time 198 00:09:23,480 --> 00:09:26,040 Speaker 2: to buy we soda than at this IPO. And you 199 00:09:26,120 --> 00:09:30,040 Speaker 2: know we've you know, every year we're compounding growth at 200 00:09:30,160 --> 00:09:33,680 Speaker 2: sort of twelve to fifteen percent. You know, we're sustaining 201 00:09:33,760 --> 00:09:36,160 Speaker 2: our margins. You know, in two years time, I'd be 202 00:09:36,280 --> 00:09:38,880 Speaker 2: very surprised if the valuation isn't significantly ahead of where 203 00:09:38,920 --> 00:09:39,360 Speaker 2: it is today.