Junior market targets home computers

A SCREEN-BASED stock exchange aimed at private investors in small firms is planned by a group of businessmen including Hermann Hauser, the founder of Acorn computers, writes William Gleeson.

The exchange, expected to be up and running by the middle of next year, will list companies with turnovers ranging from pounds 1m to pounds 20m.

Private investors using the exchange will be able to buy and sell shares using home or office personal computers. Transaction costs will be minimal, according to the promoters.

Jack Lang, an electronics entrepreneur and former academic, is managing directorof Electronic Share Interchange, the Cambridge company set up to create the exchange.

He says it willfill a gap in funding needs. 'If you are a company with a pounds 20m turnover, and you need pounds 2m to expand where can you turn for it? Our research has found that one in four companies is interested in such a scheme to fund their development.'

ESI is discussing registration as a recognised investment exchange with the Securities and Investments Board. 'All investors will need is a computer with a modem and a software package, which we will provide for them as part of the joining pack at a cost of about pounds 150. Dealing costs will be around pounds 4.50 a transaction, making deals of around pounds 250 economic,' said Mr Lang. The shares are to be traded on a matched bargain basis, using an electronic order board to show price and volumes.

A set of listing rules has been drawn up by Gouldens, the lawyers. Gouldens helped the London Stock Exchange devise its Yellow Book listing rules. ESI has also been advised by Neil Austin, a KPMG Peat Marwick corporate finance partner, who was on the LSE's small companies working party.

ESI expects to open next summer with between 30 and 50 companies listed and has a target of listing 450 companies.

The ESI move is one of a number of developments threatening the status of the London Stock Exchange. Ronald Cohen, chairman of Apax Partners, a firm of venture capitalists, has been trying to raise support in the City for a new enterprise market for small companies. Mr Cohen's move follows the London Stock Exchange's refusal to replace the Unlisted Securities Market, due for closure in 1996, with another market aimed at smaller companies. Venture capitalists have traditionally used the USM as an exit route from investments.

Tradepoint, a Covent Garden firm, is hoping to start an alternative dealing service to the Stock Exchange's automated quotation system in the autumn. SIB is considering an application from Tradepoint to upgrade its status.