Conceived in 1995, AIM claims to be the most successful market for growth companies in the world, with over 1,164 companies listed from all over the world as of April, 2011, roughly a quarter of which are non-UK companies. The market is an alternative to the London Stock Exchange for smaller growth companies seeking growth financing. Total market capitalization as of April 2011 exceeded GBP81 billion.
While 2005-2006 seems to have been the peak year for number of admissions (300 to 400 companies admitted each year to the exchange, raising in the range of GBP 15-16 billion each year), activity has decreased in the recession years (GBP 5-6 billion in each of 2009-2010 and only GBP 2 billion until April 30th of this year). Nevertheless, there is a steady number of new firms admitted (22 before April 30th of this year), with many market observers saying that the number of issues is likely to increase.
What might be surprising to the reader is that a company doesn’t have to be that large to be listed on the AIM. The AIM can also accommodate early stage companies and venture capital companies. Approximately a third of the companies have market capitalizations of less than GBP 10 million. The average market capitalization is around GBP 70 million.
Listing on the AIM, as with most stock exchanges, requires a high degree of quality and transparency from the interested firm. There should be some breadth and depth to the management team, good corporate governance implemented, ideally good growth prospects, solid customers, a good strategy, a unique selling proposition and a defensible market niche with barriers to entry.
So when might a Central European business owner choose to list on the AIM, as opposed to the WSE? Both stock exchanges offer excellent options.
First, it depends what constituency you wish to target. If business owners wish to define their company as Central European, and wish to raise their profile with Central European investors (who are often also clients or consumers), then the WSE may be the preferable option. For a company that wishes to position itself globally (both global emerging markets as well as in more developed Anglo Saxon markets), AIM would tend to offer the better positioning.
Before making the choice as to where to list your company and raise capital, a check-list of items to check would include:
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The legal and regulatory environment affecting your company, and your listing;
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The cost of listing, and your advisory relationships;
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The likelihood of having research coverage for your company, and liquidity thanks to an active following by investors.
Whether listing on the WSE or AIM, business owners of small- to mid-sized companies should plan to spend somewhere in the range of 6-10 percent (or more) of the capital raised for advisors and stock exchange fees. While a part of this would be by way of a success fee, payable only in the event that capital is raised, probably more than half of the amount would be by way of fixed fees (for lawyers, auditors, listing fees, etc.) that would be payable even in the event that a listing did not succeed.
Although many business owners equate an Initial Public Offering with hitting the jackpot, there is also a degree of risk involved, as well as ongoing disclosure requirements and the cost of complying with legislation and regulations.
