The Alternative Investment Market (Aim) is among the best known destinations for small companies looking to go public. The City of London boasts an enviable crop of investors, and for many small businesses Aim has proved the perfect springboard for gaining their attention.
Soon, smaller firms will have another way to gain attention. Last week, GXG Markets, the Danish regulated market for small- and medium-sized companies, announced plans to attract UK companies by teaming up with Merchant House, the Aim-listed corporate financier.
Copenhagen-based GXG will be able to operate in London owing to European norms that allow businesses with the relevant clearances in one EU country to set up shop in a different part of the European Union. The idea is to offer British SMEs the chance to tap into European investing institutions by listing on GXG's Scandinavian based trading platform.
"GXG has an excellent reputation and an impressive list of members and with its focus on small caps we felt it would make an ideal partner for us and our clients," Merchant House chief executive Chris Day said.
Where Aim offers companies a way to tap into the resources of the City, the new offering will give small firms the chance to attract interest from European investors. The plans are timely, given the paucity of credit in the wider economy, a point touched upon by James Holmes, the chairman of the Aim-listed corporate financier.
"With banks and many institutions reluctant to support SMEs in the current climate it seemed natural to us to offer them the chance to raise funds and widen their shareholder bases by linking in to a European exchange," he said.
For GXG, the move is part of plans to a create Europe-wide market for smaller businesses. "We have been looking to expand into other European markets to create a pan European marketplace for SMEs and alternative investment," GXG chief executive Mikael Rosenberg said. "Our partnership with [Merchant House]... provides an excellent reach into the most important European market."
GXG and Merchant House said companies looking to list on the exchange will tend to have market values of between £4m and £42m.
GXG chairman Carl Johan Hogbom portrayed the new market as an alterative to local exchanges. "We will provide British SMEs [with] a very competitive alternative to the traditional British exchanges," he said. "There is ample room for a European exchange that targets SMEs."
Of course, given the supplementary investor bases, it is possible that companies go for dual listings – floating on Aim to tap into the City, and on GXG to draw additional funds from Europe. In the end, such decisions will depend on individual firms. Either way, the option of a new arena tailored to help small companies raise extra funds is a welcome development.
Origo injects fresh funds in Unipower
Investors received an indication of the strength of the market for electric batteries last week when Origo Partners, the London-listed China-focused private equity group, announced a follow-on investment in Unipower Battery. Unipower was set up last year by the privately-held Chinese battery group Huanyu, and makes large polymer batteries that are primarily used to power electric vehicles. The business is currently focused on Chinese public sector buses, a segment that is set to expand as China steps up efforts to meet its target of putting at least 20,000 electric and hybrid buses on the country's roads by the end of next year.
The opportunity is apparent when you consider that less than 500 pure electric buses and 1,500 hybrid buses were produced in China last year, according to Unipower's estimates. The appetite is such that Unipower's current capacity is not enough to meet this year's indicative demand from its largest customer, "let alone demand from other existing and prospective customers", according to Origo.
Eyeing this gap, Unipower is looking to increase capacity – and with that in mind, Origo is ploughing in up to $15m (£9.3m) as part of a $22m convertible note offering by the company. The injection is a follow up to Origo's initial equity investment of $4.3m back in August last year.
The extra investment was welcomed by analysts. "Unipower has an existing customer base and with demand for electric buses being driven by the Chinese Government, we view [it] as well placed to benefit from this growing sub-sector," Liberum Capital said when the deal was announced. Noting the gap between the vehicles produced last year and the Government's target for the end of 2012, they added that Unipower's order book should remain strong.
"It is also positive to hear that Unipower is already performing well, with revenue run rates doubling in the short time in which Origo has been invested in the business," they said.
Origo chief executive Chris Rynning also touched upon the strides made in recent months. "We are delighted with the progress that Unipower has made since our first investment last year," he said.
"We see a tremendous opportunity in this rapidly developing sector where short- and long-term demand is underpinned by strong support for electric vehicles from the Chinese Government."
Nautical enjoys Kraken boost
Nautical Petroleum is set to publish its half yearly results this morning – and analysts expect the update to offer detail on potential drilling targets alongside news of a healthy year-end cash balance.
The North Sea oil prospector tumbled in February after some disappointing news regarding a well in the Catcher Field in the Central North Sea in which it has a minority stake. But that was then. Earlier this month, it cheered investors by upgrading guidance for its Kraken field, prompting RBC Capital Markets, which expects to hear of a cash balance of £126m this morning, to raise its target price for the stock to 675p from 510p.
Yet more positive comment was forthcoming from Evolution Securities, whose analysts conceded that while they had been expecting an upgrade, the "magnitude [was] larger than we, and probably the market, was anticipating."
Following this morning's results, investors will be looking forward to the Competent Person's Report, which will independently verify the results from Kraken, and which is due in late April or in May.
New World eyes Aim flotation
The tragic events in Japan and the turmoil in the Middle East have induced much volatility in the stock market. But New World Oil and Gas is unperturbed. Last week, the oil and gas investment firm said it was planning to raise £3m by floating on Aim. Its initial focus is on acquiring oil and gas projects in Central America. In particular, New World, which is led by chief executive William Kelleher, is eyeing the Peten Basin beneath Yucatan Peninsula, where, it says, "over 70 billion barrels" of proven oil reserves have been booked by Mexico's national company, Pemex.