Will BABEL go public?

Since its incorporation in 2003, BABEL has operated under a partnership model, i.e. involving some workers in the increase of the company's value. Experience shows that firms that offer the services of highly qualified professionals work very well with this model: they grow rapidly, they are profitable, they offer attractive professional careers and they tend to provide a work environment that is both collaborative and stimulating.

I do not want to refer here to these benefits, but to the economic value of owning a part of the company in which you work. This value is defined in two ways: dividends and the increase in capital in case of sale. Although some companies with high growth rates reinvest all their profits, BABEL has followed the policy of distributing dividends year after year, as our strategy is to maximise this way of rewarding the shareholder, doing it in a solid and increasing way. The equity increase only materialises if the partner leaves the company, which is an unusual event.

However, it has always been our intention to progressively increase the liquidity of our company's shares. There is currently a guaranteed sale value, which is calculated and approved every year at the Annual General Meeting, with which the company pays for the shares of outgoing shareholders. This is a level of liquidity similar to that of your flat, which can only materialise if you leave it. A couple of years ago we also set up an extraordinary procedure for shareholders who urgently needed money, allowing them to sell part of their ownership share with a slight penalty, without having to exit the company.

The definitive leap in liquidity will be to trade on organised markets. Several European stock exchanges offer this possibility for medium-sized companies like ours. Market entry has several benefits:

• The aforementioned increase in liquidity is not only interesting in itself, but also increases the value of the shares: what can be easily sold is automatically worth more.
• The capital market is an accessible source of resources for expansion. To date, BABEL has grown only using its own funds, which have come from the shareholders' investment and undistributed profits. We have hardly used bank financing. But if we would like to undertake a larger expansion in the future, including investments in new markets and inorganic operations (purchasing other companies), we might need more money than we have, which could well come from a share capital increase.
• The financial value of our company is currently uncertain. We calculate it year after year, but nothing assures us that the figure we obtain is a true market value. If we were listed on an organised market, we would have a reference amount, which is the market capitalisation. This amount would simplify things a lot if we wanted to undertake operations like a merger with a firm of a similar size to ours, as we would have a clear and justified idea of the value of our contribution.
• Listing on organised markets imposes a very high level of discipline and transparency regarding accounts. We have largely reached that level, but in this way our effort would be officially accredited and would serve to reinforce our image of seriousness and solvency.

The listing of BABEL on an organised market is currently more of an idea than a concrete plan. Not only have no dates been set, but it has not even been considered as to which would be the right market. There are two main options: BME’s (the company that manages the Spanish stock exchanges) Alternative Equity Market and one of Euronext's markets for medium-sized companies (Euronext is the company that manages, among others, the Paris, Amsterdam, Brussels and Lisbon stock exchanges).

Euronext carries out an annual ten month capital market training programme aimed at companies that are weighing up being listed. The programme is called TechShare and this year around one hundred and thirty-five companies from all over Europe, selected by Euronext, are taking part. BABEL is one of them, along with nine other Spanish firms in sectors such as the bio-sanitary, data management, software and technology service sectors. The programme began with a two-day seminar at the HEC business school in Paris, near Versailles, in which I had the opportunity to participate. 

Euronext TechShare 2018-2019 | Kick-off campus at HEC Paris​