Alternative market struggles to gain institutions' support

TOM STEVENSON

Deputy City Editor

The Alternative Investment Market is failing to attract the institutions who will be the key to its success, according to brokers trying to bring companies to the fledgling share market. Two months after the launch of AIM, investors and companies alike are still waiting for the market to achieve critical mass.

Since its launch in June, when 10 companies braved the first day of dealings, a further 20 companies have joined AIM. Only five of those, however, are newly traded stocks. The others have transferred from the Rule 4.2 trading facility and hardly any new money has been raised.

Former 4.2 companies have until the end of September to move over, using a simplified procedure which should in theory cost less than a full listing. With the holidays out of the way, supporters of the market are counting on a final rush of transfers over the next few weeks.

A spokesman for the Stock Exchange described the first two months trading as "a good steady start" - pointing to a similarly sluggish beginning for the Unlisted Securities Market 15 years ago - but brokers specialising in the market have been less enthusiastic.

Neil Austin, head of KPMG's AIM team, said: "There is some resistance from institutions. It is a chicken and egg situation, with a need for the volume of companies to increase before the market will bother to take a look."

He thought the catalyst for growth would be the expected launch in October of venture capital trusts and other pooled investments which would give investors exposure to a spread of AIM companies.

Another key development would be an increase in the number of companies actually raising money from the market, rather than simply acquiring a listing for existing shares.

That would increase the liquidity of the market; it is currently unattractive to institutions which are loath to acquire shares they are then unable to sell again.

One major disappointment of the market has been the absence of what some expected to be a flood of high-tech flotations, involving very young or start-up companies raising money they could not obtain from venture capital or from other sources.

Robin Dunham at Charles Stanley said the firm had talked to a number of high-tech companies but said their owners had unrealistic expectations of the valuations they could achieve from an AIM listing.

Collins Stewart went further, saying it was avoiding the sector completely. In the early stages of the market, the firm said, investors were only interested in solid companies with good track records.

Elizabeth Kennedy at Allied Provincial - recently taken over by King & Shaxson's Greig Middleton arm - agreed that quality was the key. She is bringing to the market Creos, a Scottish manufacturer of medical imaging equipmentwhich she stresses is not a blue sky business, but one with contracts already in the bag.

She added that Allied had turned down a number of companies because of their unrealistic price expectations. This could be avoided by taking managements to institutions early in the process.

A further obstacle apparently holding the market back was the unexpectedly high cost of gaining a listing. One broker said a number of clients had been put off by the fees that other firms were charging to act as nominated adviser, a Stock Exchange requirement of companies listing on AIM.

There is strong disagreement among brokers about what constitutes a sensible fee for bringing a company to the market, with one adviser offering a cut-price package of pounds 25,000, less than a tenth of the price paid by other companies that have already joined AIM.

Start your day with The Independent, sign up for daily news emails
News
i100
Arts and Entertainment
Billie Piper as Brona in Penny Dreadful
tvReview: It’s business as usual in Victorian London. Let’s hope that changes as we get further into the new series spoiler alert
Life and Style
A nurse tends to a recovering patient on a general ward at The Queen Elizabeth Hospital in Birmingham
health
News
science
Arts and Entertainment
No Offence
tvReview: No Offence has characters who are larger than life and yet somehow completely true to life at the same time spoiler alert
News
Chuck Norris pictured in 1996
people
ebooks
ebooksA celebration of British elections
Arts and Entertainment
Sarah Lucas, I SCREAM DADDIO, Installation View, British Pavilion 2015
artWhy Sarah Lucas is the perfect choice to represent British art at the Venice Biennale
News
A voter placing a ballot paper in the box at a polling station
i100
News
people
Arts and Entertainment
The Queen (Kristin Scott Thomas) in The Audience
theatreReview: Stephen Daldry's direction is crisp in perfectly-timed revival
Sport
football
  • Get to the point
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.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant - Swiss Banking and Finance

£20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...

Ashdown Group: Marketing Executive - 6 month FTC - Central London

£25000 - £30000 per annum + benefits: Ashdown Group: An exciting opportunity f...

Ashdown Group: Junior Project Manager (website, web application) - Agile

£215 per day: Ashdown Group: Junior Project Manager (website, web application ...

Guru Careers: Software Engineer / Software Developer

£40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...

Day In a Page

General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'
Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

Flesh in Venice

Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
11 best anti-ageing day creams

11 best anti-ageing day creams

Slow down the ageing process with one of these high-performance, hardworking anti-agers
Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

Juventus vs Real Madrid

Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

Ashes series looks a lost cause for England...

Whoever takes over as ECB director of cricket, says Stephen Brenkley
Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power