Battle of the Stock Markets

  • Added:
    Apr 22, 2013
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Stock Market
Stock Market
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AIM vs ISDX - But which stock market should SME’s choose?
AIM: The Champion

The success of The London Stock Exchanges AIM stock market is unquestionable. The market offers smaller growing companies a destination to raise funding, both at the time of flotation and though the further issues of shares once listed. Over 3,000 companies have joined AIM since it’s inception in 1995, and AIM currently wears the crown of most successful growth stock market in the world.

AIM offers companies all the benefits of being on a world renowned junior stock market and at the same time, the market is designed with smaller growing companies in mind. This means less red tape and fewer regulatory hoops than larger stock markets.

Companies joining the market do not require a trading history to meet the entry criteria of the market, and there is no restriction on the size or profitability which a company needs to achieve before joining AIM. The London Stock Exchange, who own and regulate AIM have made the market as accessible as possible for companies. However, few start up and pre-revenue businesses will be able to attract the investor interest required to float on AIM and undertake a fundraising, as AIM investors prefer to see companies with at least some trading history and existing revenue streams.

There is no minimum amount of shares that a company has to put on AIM at the time of flotation. However, the advisor and broker costs associated with joining AIM and undertaking a fundraising are not insignificant. You can learn more about floating on the AIM Stock Market online from many available sources.

ISDX: The Challenger

In 2006 came a worthy challenger to AIM. PLUS Markets Group run by AIM’s ex-boss Simon Brickles re-branded and re-vamped the existing OFEX stock market and created the PLUS-quoted stock market. PLUS-quoted had an even more flexible approach to the entry criteria, and offered a less expensive route for smaller companies to take their first step on a UK Stock Market.

PLUS-quoted reached an important milestone in 2007 when it was granted RIE (Recognised Investment Exchange) status, thus placing it on the same level as many other stock exchanges, including AIM.

In October 2012 PLUS-quoted stock market was taken over by ICAP the world’s leading interdealer broker. ISDX is currently the third largest stock market in the UK by number of companies, behind The London Stock Exchanges Main Market and AIM. ICAP the new owners of ISDX are set to grow the number of companies listing on the market in the months ahead. Learn more about floating on the ISDX there are many good sources available online.

The verdict

The average size of companies joining AIM has risen in recent years, and the costs of listing on AIM makes it less accessible for some the smaller companies.

ISDX, offers smaller companies a more accessible venue, with joining costs around a third of those for AIM. However, one of AIM’s key benefits is that it‘s a good market for companies to raise money on, particularly if they are acquisitive and requiring repeat fundraisings. ISDX on the other hand, currently remains predominantly a market for companies looking to raise under £3m. Therefore, for larger or repeat fundraisings, AIM remains the market of choice for companies.

Of course it is possible to use both stock markets, leveraging their own particular benefits. A number of companies have cut their teeth on PLUS (ISDX) and benefitted from the flexible regulation and low joining costs that the market offers, then moved to AIM when they require larger tranches of funding.

So for SME’s, both stock markets may have something to offer growing businesses looking for investment capital.

Author's Profile

John Holland was the former head of the UK regional operation at the London Stock Exchange, with responsibility for both AIM and The Main Market. He has been advising companies since 1995 about stock market flotation and is a regular author of company finance and stock market publications and articles in business and financial press as well as various institutions on the internet.

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