As cross border counsel to many high growth companies in the US and UK that are seeking access to capital, we are seeing an increased need for well capitalized, well regulated and well respected but lighter touch exchanges. This has been driven by the higher cost and complexity, which is associated with listing on the main or premium exchanges. It is also making it increasingly difficult for these companies to access capital from the public markets at a critical time in their business life-cycle.
Although the dominant US exchanges have provided many small-cap companies with access to capital, we are beginning to see a trend towards international companies considering the Alternative Investment Market (AIM) as a viable and attractive option with distinguishing characteristics.
“AIM is the growth exchange operated by the London Stock Exchange
and bills itself as offering “small and micro-cap growth companies,
their founders and VC investors access to growth capital and partial
exit at IPO at much lower cost than US exchanges and with a
Regulatory regime tailored to smaller growth companies.”
Founders, financiers, shareholders and boards are increasingly demanding that companies conduct a balanced and adequate review of the best route forward when considering admission to a market. Whether for fundraising, an exit, liquidity or otherwise, they are more frequently measuring AIM against the other exchanges and a viable alternative to VC or private equity investment.
Access to quality well-known institutional investors (*see examples below) for companies with a market capitalization in the range of $20 million to $500 million are typically more difficult to achieve in the US markets.
Listing on AIM is a fraction of the cost of maintaining a listing in the US. Consider not only the annual fee of $10,000, but also the half yearly rather than quarterly reporting, no Sarbanes Oxley, lower insurance costs, lower IPO underwriting fees.
A partial sell down for founders and venture capital investors is possible at the time of the IPO. And there is strong success rate for companies coming back to the market to raise further capital and for existing shareholders to exit.
Key AIM statistics identified include:
Average market cap at IPO for AIM in 2016 $101m (NASDAQ $505m)
Average IPO deal size for AIM in 2016 $39m (NASDAQ $133m)
$1.5bn raised from AIM IPOs in 2016, a 65% increase on 2015
25% of IPO proceeds went to selling shareholders in 2016 (NASDAQ 3%)
Growth sectors represented 42% of AIM IPOs in period 2014-16
International companies represented 32% of AIM IPOs 2014-16
*Largest institutional investors in AIM stocks include Blackrock,
Invesco, Schroders, Fidelity, Henderson/Janus and AXA.
(Source: London Stock Exchange, 2017)
Technology companies with international aspirations and with revenues in the range of $5 million to $75 million are strong candidates for an IPO on the AIM market. US life sciences companies (including pre-revenue) are some of the most successful recent AIM IPOs in London.