A recently published study by the London School of Economics has concluded that AIM is now the world’s leading stock market for young growing companies. This is no surprise to us at DMH Stallard as we have been bringing companies to AIM since the market was created. We have always believed that AIM, the junior market operated by the London Stock Exchange, would be a success. A deep investment pool in the City was ready to look to the higher rewards offered by young growing companies. Anecdotal opinion was that this was accompanied by a correspondingly high level of risk but the evidence shows otherwise and during the last four years the failure rate of companies on AIM is less that 3%. It is a sign of this success that the amount of money raised on AIM increased from £2 billion in 2003 to £15.7 billion in 2006.
This is good news for young companies looking to raise permanent capital to help them consolidate and expand. What is even better news is that the choice of an exchange in London for such companies has increased with the emergence of PLUS Markets – simply referred to as “PLUS” - as a credible alternative. This is another market we have supported from its inception and DMH Stallard is one of only three law firms with “corporate adviser” status on PLUS. The market is managed by much of the team that made AIM a success and so we believe PLUS will be an important market. In many ways PLUS resembles the AIM market of 5 or 10 years ago, with the ability to take on companies at an earlier stage of their development; it is not unusual to see a company come to PLUS raising less that £1 million whereas that is not often the case on AIM these days. This is not to say that PLUS is a small market by any means, and on 22 January 2008 PLUS’s market share of all UK retail trading activity exceeded that of the London Stock Exchange for the first time. Many well known companies use PLUS as their primary market such as Arsenal FC and Shepherd Neame, the brewers.
So there is more choice for companies, but which is the right market to choose? There are many factors that need to be considered including the sector of the market that the company is in, the amount of money it is looking to raise and the appetite of institutional investors at a particular time. This is where a company needs professional help. The markets are constantly changing and evolving and guidance can only be given properly by professionals who have both a proven track record and who are involved with these markets on a daily basis.