Turbocharging your EMI with a Private Market

Since its launch in 2000, the UK’s EMI scheme has proven itself as an incredibly popular model, with a reported 89% of UK companies who use a tax-advantaged share scheme electing to use this approach. In short, it is recognised as offering a tax efficient way of allowing growth companies to provide equity stakes in a bid to attract high quality talent, critically matching the financial interests of founders and employees.

However, one of the single biggest challenges here is the fact that despite employees building this paper wealth, a lack of liquidity makes it very difficult to realise those gains. The collective efforts of employees can continue to boost the valuation, but typically they are left waiting for the necessary corporate event before they can crystalise any profits here. What’s more, the accuracy of the valuation is also hampered – if not indeed depressed – by the lack of liquidity.

So, what’s the solution? By integrating with an established private market such as JP Jenkins, this can provide invaluable institutional buy side distribution, a move that can be instrumental in delivering that improved liquidity and better price discovery. It also gives those institutional investors visibility of a new cohort of fast growth companies - as well as the potential to back them. That’s what drove us to partner with the popular equity management and cap table software provider Ledgy, streamlining access to our services for thousands of British companies.

The systems we have developed at JP Jenkins allow us to integrate directly into the underlying financial ecosystem. That enables better price discovery whilst offering client companies the ability to facilitate well governed and transparent securities transfers with whatever degree of ownership control they may require. What’s more this prints a live market price, giving employees added confidence that their efforts and investment into the business are very much worthwhile, rather than just a seemingly spurious number where the prospect of that converting into hard cash always seems a long way off.

The EMI scheme was undoubtedly a positive result of solid legislation that has helped many companies retain some great talent, but over a quarter of a century later and the world has very definitely moved on. Recognition of the power of being able to unlock and recycle capital grows, whilst more recently the sluggish IPO market leaving companies to stay private for longer has applied another brake on progress. With the recent advances that have been made in integrating private markets like our own venue into the broader financial ecosystem, now is the time for innovative growth companies to harness the power this combination holds.

Mike McCudden, CEO, JP Jenkins

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