Listing on London's international small-cap market

The London Stock Exchange has recently adopted new rules to make it easier and faster for overseas companies to join its international small-cap market -- the Alternative Investment Market, or AIM. U.S. companies should take note. Listing on AIM provides entry to institutional investors from around the world, as well as access to the world's largest pool of investment capital next to New York.

The new rules are part of an ongoing effort to attract rising overseas companies to AIM. They allow companies whose shares are already traded on the "designated markets" of Nasdaq and the New York Stock Exchange to use their existing annual report and audited accounts as a basis for listing on AIM also. The new fast-track route to AIM also applies to companies listed on seven other "designated markets": The Australian Stock Exchange, Euronext, Deutsche Borse, JSE Securities Exchange (South Africa), Stockholmsborsen, Swiss Exchange and Toronto Stock Exchange.

Over 700 companies are now traded on AIM, including eight U.S. companies. AIM hopes to encourage listing by companies in the life sciences, technology, gaming and natural resources sectors. Would listing on AIM benefit your company?

Advantages of AIM

London is the most international of the world's three primary financial centers, and the London Stock Exchange, which is the largest in Europe, has more foreign company listings -- 522 from over 60 countries -- than any other exchange in the world. London turns over more foreign equities than any other market, and leads also in international bonds. And London stands pre-eminent as Europe's financial capital. Listing on AIM provides entry to this diverse and dynamic marketplace as well as more specific benefits.

  • Shareholder diversity. London's international market is also predominantly institutional. Over 530 foreign banks are located in London, along with similar concentrations of other types of investment institutions from around the world. Listing on AIM would enable your company to access London's gathering of institutional investors to broaden and diversify its shareholder base.
  • Capital raising. The concentration of world investment institutions in London provides a deep pool of investment capital. In 2001 the influx of capital channeled through the London Stock Exchange was nearly $30 billion; in 2002 it was over $26 billion. Since AIM was created in 1995, over 850 companies have used it to raise more than $10 billion. By listing on AIM your company could tap into the London market as a new source of investment capital to finance its growth.
  • Raised profile. An AIM listing would raise your company's public profile and help create an increased following for your company's shares among analysts, brokers and institutional investors.
  • Regulatory standards. Because AIM is owned, operated and regulated by the London Stock Exchange, AIM companies benefit from its respected regulatory standards and international expertise. Requirements for listing

    AIM has no specific suitability criteria. Instead, the central requirement for admission is the appointment by the company of a nominated adviser to perform due diligence and certify that the company is appropriate for AIM. Nominated advisers are selected from a list of corporate finance firms approved by the London Stock Exchange. The nominated adviser also assists the applicant company through the admission process, and is responsible for advising and guiding the company's directors on compliance with AIM rules and disclosure obligations on an ongoing basis. Other listing requirements include:

  • Appointment of a broker -- a securities house that is a member of the London Stock Exchange -- for the initial flotation on AIM and subsequent trading in the after-market. The broker may be the same as the nominated adviser.
  • Production of an admission document to disclose such matters as the company's business activities, financial position, working capital, major shareholders and backgrounds of directors.
    For most companies using the new fast-track route to AIM, however, the requirement to produce an admission document is waived. Instead, they can use their exiting annual report and audited accounts as the basis for admission, which greatly simplifies and speeds up the process. A company using the new route must:

  • have been traded on one of the "designated markets" for at least 18 months;
  • join AIM within nine months of its financial year-end;
  • disclose any additional information required under AIM rules that has not already been disclosed in its home market; and
  • have an address or Web site where the company makes available its public announcements and documents for the past two years. Summing up

    U.S. companies can access a rich and diverse additional market for their shares by listing on AIM. The new rules make listing fast and easy, and therefore entry to London's international marketplace less costly, for qualifying companies interested in using AIM to boost their future growth.

    Kaplan practices corporate, financial and international business law in San Diego. He formerly practiced in London.

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