Why AIM keeps misfiring

The delisting of Fusionex has added to growing unease around the alternative investment market

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Jun 19, 2017
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London’s alternative investment market (AIM) was in the news again last week for all the wrong reasons with controversy over the delisting of Fusionex, a Malaysian technology group that joined in December 2012 (Richard Beresford writes). 

Shareholders were angry about the move, which was initiated by the chief executive and 41 per cent shareholder Ivan Teh. Their proposal was backed by 85 per cent of the shareholder vote, easily exceeding the 75 per cent required by the AIM rules to withdraw from the market.

The Fusionex episode has added to the growing sense of unease with which many view AIM. Increasingly, companies are turning to alternatives such as standard listings and NASDAQ OMX’s First North market.

Ironically, that movement is being driven partly by the tightening of the AIM rules, including the changes in 2015, which effectively banished new cash shells from coming to the market after controversy over Gate Ventures (a company that is now successfully listed on First North). There is also an issue over what is viewed as an excessively cautious approach by the AIM team as to what is allowed on to the market.

For many overseas companies and advisers, AIM has less prestige than the main market, including the standard listed segment, and episodes such as Fusionex have not helped.

The standard list also has a significant advantage over AIM in terms of cost. Without the need to pay for a nominated adviser (or its lawyers), a listing on the standard segment can be less than half of an AIM listing and getting a shell on to the market can cost as little as £90,000.

In terms of certainty, admission to AIM is meant to be policed by the nominated advisers whose role is to judge the suitability of companies for admission, but the market has increasingly been imposing its own view, second guessing their front-line regulators. 

Not many relish the prospect of spending £500,000 on a listing process, undertaking a successful fund raising and then getting turned down – for undisclosed reasons – at the last minute by the AIM team. The UK Listing Authority, on the other hand, is accountable and susceptible to judicial review or appeal which, in most cases, seems to make it more rational in approach.

However, like AIM, the authority has pretty strong ideas about the sorts of people and businesses it does not wish to see coming to the public markets. 

Changes to the prospectus regime scheduled for implementation soon – including the increase in the number of shares that can be issued without a prospectus from 10 per cent to 20 per cent over 12 months – can only enhance the standard list’s attractiveness.

Expect to see a growing number of transfers from AIM to the standard list and more commercial companies choosing that standard listing route. AIM is definitely not dead, but it is facing stiff competition.

Richard Beresford is the co-founder and chairman of the London law firm McCarthy Denning 

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