Small Talk: Lifting ban on ISAs could help AIM to make up funding shortfall
Monday 15 September 2008
Nobody needs to be told that the Alternative Investment Market (Aim) is struggling. As better-known groups on the main list complain about the effect of the economy on their businesses, often it is the smaller boys that are feeling the severest pinch.
The solution? Apart from a water-into-wine miraculous recovery in the economy and investors suddenly feeling confident about investing in small companies for the first time in ages, there does not seem much about that will stimulate the market.
One man who thinks he has the solution is Clive Garston, a lawyer at Halliwells and a specialist Aim practitioner who reckons that the current ban on ISAs investing in small companies should be lifted. Aim investments had benefited from taper relief on capital gains tax, which was abolished this year. So far there has been nothing to replace it and companies have suffered as a source of funding has dried up.
Mr Garston's argument is that with investors turned off the idea of putting money directly into nearly every Aim company, with the possible exception of some of the resources groups that have managed to raise funding this year, the shortfall can be partly made up by relaxing the restrictions on ISA investments. "There are a number of big companies on Aim that ISAs do not have access to," said Mr Garston, who argues that these companies are no riskier than some of the smaller outfits on the main list.
That's all fine, but given that professional investors are increasingly being turned off the Aim market, it is a bit rich asking savers to pick up the slack through their ISA investments.
There has not been a huge amount of good news around the biotech sector in recent months. Indeed, given the increasingly nervous disposition of many investors, companies that do not yet make much revenue had better hope that there is enough in the bank to keep them going for a while.
Some, however, always come up smelling of roses. Proximagen Neuroscience, a brain illness research group, signed a licensing deal with the US group Upsher-Smith back in July, which will earn it $232m if several clinical trials are passed. As part of that deal, the Americans bought a 7 per cent stake for $5m. However, things just get better and better for Proximagen: because of sterling's slide against the US dollar in the last few weeks, Upsher-Smith's 7 per cent is going to cost them more like $6m when the cash is handed over on 12 October.
This will no doubt be welcome news, especially as Proximagen's interim numbers last month showed that its pre-tax loss had widened, compared with the same period last year.
The 2008 Aim awards are being held at Old Billingsgate Market next month and there will no doubt be the usual parade of best company, best analyst and most improved chief executive, etcetera, etcetera. One award that is unlikely to be included in this particular love-in is the "2008 Aim award for the company with the silliest name". If there was such a gong, it would surely go to FFastFill.
The company is a derivatives trading platform, although you would never have guessed it, and even if some might think that having clients in the financial services sector means that things are not going too well for the group, they would be wrong, says the company.
FFastFill make its money by selling licences for its products to banks such as JP Morgan and Landsbanki, but they argue that derivatives are one of the few areas of the financial markets that have hitherto withstood the economic crisis. Indeed, they say, as volatility increases, so banks need more derivatives traders to take advantage of the opportunities that come along.
No doubt FFastFill would welcome an award at next month's jamboree, although it already had cause to celebrate last week, when the group announced that it had signed a deal with the interdealer broker Icap to provide it with live connectivity to the London Metal Exchange.
Sabien Technology's website showcases a very impressive list of companies that use its technology scrolling along the left hand side of the page, ranging from Tesco, KPMG and Standard Charter Bank [sic].
The companies are all clients that have splashed out for Sabien's M2G technology, a device which can be retrofitted to a commercial boiler system, generating, they claim, up to 30 per cent of efficiency savings. Each unit costs £1,850, with no further maintenance charges involved.
The latest company to add themselves to the illustrious list is insurance group Aviva, which announced a couple of weeks ago that it was spending £188,000 on M2G devices after taking part in what Sabien's chief executive, Alan O'Brien, calls Project 10, a trial where potential clients pay to test M2G.
With such a strong list of customers, Sabien probably rues the fact that it has to allow trials of its products, but "we're not Microsoft," conceded Mr O'Brien, saying that his points of contact are generally cautious and conservative engineers, who want to test what they are being asked to buy.
Certainly investors will be hoping that some of the group's triallists turn into full paying customers: the stock has fallen by 82.7 per cent in the last 12 months.
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