The flood of international companies coming to the Alternative Investment Market (Aim) is unlikely to let up any time soon, according to a leading adviser on Aim, London's junior market.
Despite the wobble in equity markets at the start of the summer, Halliwells LLP, a top legal adviser to smaller companies, says it has seen no slowdown in the number of foreign firms looking to come to Aim. Adam Fenner, a partner at the law firm, said: "We may even see some deal congestion in the fourth quarter of the year as investors' roadshow diaries are booked up with companies that have been held off until the end of the third quarter."
Much of Aim's recent growth has been driven by overseas firms listing in London. There are now more than 250 foreign companies on the junior market, accounting for about 27 per cent of its value, from 25 different countries.
Why they come to Aim is simple. The market gives them access to a large reserve of money, the admission procedure is straightforward to understand and the whole process is lightly regulated. Meanwhile, the rise in compliance costs in the US following the introduction of the Sarbanes Oxley reforms in 2002 has enhanced Aim's attractiveness to foreign firms. In the words of another partner at Halliwells, Matthew Puhar: "The UK is the only country that can seriously compete with the US in terms of available capital. This, combined with a simple admissions procedure and light regulation, should ensure that Aim remains a popular destination for foreign companies."
Of course the downside to the market's light regulatory framework is that frauds such as Langbar are more likely to happen. It too was a foreign company float. In this world, everything comes at a price.
It is rare to see a company that is already profitable join Ofex. Mastermailer Holdings is one such enterprise. It is expected to float on the lightly regulated exchange this autumn, probably at the start of next month, and hopes to raise about £1m of new money in the process.
The group quite simply makes pay slips - that vital piece of paper that hits the desks of us wage slaves up and down the country every month. Mastermailer already has about 5 per cent of this highly fragmented market in the UK and will use the money raised to fund further growth in this country and an expansion into Europe and North America.
Over the past eight years, the business has been built up by husband and wife team Stephen and Claudia Black from their Worcester home. So far they have funded the firm with the help of friends and family. What makes Mastermailer special is its patented adhesive. It is key to the group's pay slips. These patents are valid up to 2021 in the UK and North America and similar patents are pending in Europe and Japan.
The company's sales have grown at a rate of 40 per cent per annum for the past three years. It posted a profit of £200,000 in 2005, on revenue of £1m, and is expected to show a significant advance on these figures this year.
Brokers expect Mastermailer to list at about 200p, valuing the company at £6m. Mr and Mrs Black and Chris Sandison, their finance director, will control roughly 34 per cent of the firm on admission.
Forecast fair for lottery operator
No prizes for guessing what The Weather Lottery plc does. The group is a specialist organiser of lotteries for charities, sports clubs and other organisations in which weather temperatures from around the world generate the numbers.
This week will see its shares listed on Aim at about 8p, giving the company a market value of £6m. Weather Lottery already boasts the British Red Cross, Age Concern and the Conservative Party as clients. It is they who promote the draws to their supports, allowing players to participate with as little as £1 per week.
The company's game is based on the last digit of daily Fahrenheit temperatures in six selected European destinations, with a top prize of £10,000 for matching all six numbers, falling to £2 for matching three numbers. The chance of winning the jackpot is 200,000 to 1 over a week while the probability of matching three numbers is 14 to 1. Prizes are non-divisible, meaning that if two people get all six numbers they both get the £10,000 jackpot.
Of every £1 raised, 35p goes to the client organisation, 45p on prizes and 20p to Weather Lottery for the administration. At present the company has 1,500 clients on its books, but it believes it is addressing a potential market of up to one million organisations.