Derek Pain: Stocks wilt as over-regulation takes AIM

No Pain, No Gain

I have often criticised the esoteric accountancy requirements that are inflicting grave damage on some quoted companies. And attempts to kill share certificates is a long-standing grumble.

Today, at the risk of being billed a grumpy old man, I have another complaint – the deluge of over-regulation that is coming uncomfortably close to strangling the stock market.

The vast stack of current listing (and accounting) rules was, in the main, dreamed up when the economy was thriving. They are clearly unsuited for the recessionary influences now devastating many aspects of the nation's commercial life.

It is, I feel, not surprising that more and more companies are delisting their shares. AIM, the Stock Exchange's junior share market, is particularly vulnerable. Twenty-nine delisted in June and, on average, the monthly exit rate this year is 24. Not all have abandoned quoted life though. Booker, the cash and carry chain, has moved from AIM to the full market, but the uncomfortable fact remains that AIM is shrinking.

At the end of 2007 it embraced nearly 1,700 constituents – now there is talk that its strength could slip below 1,000 within a year or so.

The cost of retaining an AIM presence is becoming an increasingly important factor. The yearly bill is more than £200,000, which isn't excessive for a group that is turning over millions in profits. However, for a small, loss-making business it is difficult to justify such an outlay.

The share-price crash has also had an impact. Approaching 700 AIM constituents are now capitalised at less than £10m, with many around the £1m mark.

With its shares down from 50p to 3.125p, Pubs'n'Bars, a member of the no pain, no gain portfolio, has joined the minus £1m brigade. Even putting through a simple deal is expensive and will cost around £250,000. That was the accounting, legal, printing and regulatory costs incurred by another constituent, Wyatt, when it merged with Green CO2.

It is not only AIM sufferers that are feeling the strain. Regent Inns resigned from the full list because of the prohibitive expense of meeting stock market requirements. Its declining capitalisation – its shares have slumped from more than 100p to around 1p – emphasised the cost pressures. The shares are now traded on the fringe Sharemark facility.

I wonder whether the present complex regulatory regime can be justified. City authorities insist that the intention is to shelter investors. But such protection is pretty porous, judging by some of the AIM disasters that have occurred. Indeed, an American group called Sky Capital, which had a presence on AIM until a few years ago, were charged with running an alleged boiler room operation earlier this month.

Despite the cost of membership, AIM remains a relatively lightly regulated share market. Its rule book prompted a US regulator to describe it as a "casino".

A couple of years ago when AIM was booming, the light touch – although far from cheap – was seen as tolerable. But nowadays the expense of living on the junior market is extracting a wounding toll. It is estimated that around half the AIM companies that delisted this year did so because of financial stress. If the cost of survival was not so high, perhaps some of them would have stuck it out.

The AIM shrinkage is exacerbated by the near disappearance of new arrivals. At one time there was a flood of new issues. Now flotations and other cash-raising exercises have a scarcity value. Max Property, a venture seeking to take advantage of the property slump, inflated the May figure. Otherwise the maximum new money raised in any month this year was £2.4m.

Of course, AIM is not suffering in isolation. Arrivals to the full list have fallen dramatically and, around the world, flotations have become conspicuous by their (near) absence.

Stock markets are also suffering from the sharp decline in corporate activity. A few lusty takeover battles would offer inspiration. Perhaps this week's action could herald a revival. Certainly the slide in share prices has produced a multitude of bargains.

Recently, shares appeared to relinquish some of their springtime enthusiasm, but I remain fairly confident that they will strengthen as the year progresses. Britain's economy will struggle to get out of its present mess, but shares have a habit of anticipating events and many believe recovery will start next year.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

PROMOTED VIDEO
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Selby Jennings: Oil Operations

    Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

    The Jenrick Group: Night Shift Operations Manager

    £43500 per annum + pension + holidays: The Jenrick Group: Night Shift Operatio...

    SThree: Trainee Recruitment Consultant - LONDON

    £20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...

    Day In a Page

    Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

    'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

    Yazidi girls killing themselves to escape rape and imprisonment
    Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

    Ed Balls interview

    'If I think about the deficit when I'm playing the piano, it all goes wrong'
    He's behind you, dude!

    US stars in UK panto

    From David Hasselhoff to Jerry Hall
    Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

    Grace Dent's Christmas Quiz

    What are you – a festive curmudgeon or top of the tree?
    Nasa planning to build cloud cities in airships above Venus

    Nasa planning to build cloud cities in airships above Venus

    Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect
    Surrounded by high-rise flats is a little house filled with Lebanon’s history - clocks, rifles, frogmen’s uniforms and colonial helmets

    Clocks, rifles, swords, frogmen’s uniforms

    Surrounded by high-rise flats is a little house filled with Lebanon’s history
    Return to Gaza: Four months on, the wounds left by Israel's bombardment have not yet healed

    Four months after the bombardment, Gaza’s wounds are yet to heal

    Kim Sengupta is reunited with a man whose plight mirrors the suffering of the Palestinian people
    Gastric surgery: Is it really the answer to the UK's obesity epidemic?

    Is gastric surgery really the answer to the UK's obesity epidemic?

    Critics argue that it’s crazy to operate on healthy people just to stop them eating
    Homeless Veterans appeal: Christmas charity auction Part 2 - now LIVE

    Homeless Veterans appeal: Christmas charity auction

    Bid on original art, or trips of a lifetime to Africa or the 'Corrie' set, and help Homeless Veterans
    Pantomime rings the changes to welcome autistic theatre-goers

    Autism-friendly theatre

    Pantomime leads the pack in quest to welcome all
    The week Hollywood got scared and had to grow up a bit

    The week Hollywood got scared and had to grow up a bit

    Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
    From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

    Panto dames: before and after

    From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
    Thirties murder mystery novel is surprise runaway Christmas hit

    Thirties murder mystery novel is surprise runaway Christmas hit

    Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
    Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

    Anne-Marie Huby: 'Charities deserve the best'

    Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
    The botanist who hunts for giant trees at Kew Gardens

    The man who hunts giants

    A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there