Small field for start of new share market

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DELAYS and confusion surrounding the launch of the London Stock Exchange's Alter- native Investment Market, which begins trading tomorrow morning, threaten the new market's existence and raise the possibility that it could suffer the same fate as the short-lived Third Market.

Only 10 companies' shares will be traded initially, partly because of delays in approving nominated advisers and partly because many directors of com- panies considering an AIM listing prefer to let others make the inevitable early mistakes.

There has also been a wide range in the fees being quoted by advisers for bringing a company to the new market - from as little as pounds 10,000 to as much as the pounds 500,000 that a full listing can cost.

The uncertainty over price will only be made worse by the warning from Theodore Goddard, the solicitors, that directors will have to make additional disclosures about convictions, bankruptcies and involvement in receiverships or liquidations.

John Clark, Theodore's head of corporate finance, pointed out that new prospectus regulations also come into force tomorrow. These mean that, under certain circumstances, directors of institutional investment companies will have to take respon- sibility for the prospectus statements of AIM companies in which they invest.

Mr Clark said: "Many directors of potential AIM companies are afraid of putting their head above the parapet. We don't think the problems are insurmountable, but people might not realise the amount of work that is involved."

Initially, many of the companies floating on the AIM will come from the 300 whose shares are traded under the Exchange's rule 4.2, which has no prospectus requirements but permits market makers to match buying and selling orders as they arise. That facility ends on September 29, although one market-maker - JP Jenkins - has said that it will make arrangements for companies that do not want the expense and public exposure an AIM listing will involve. The most notable "refusenik" is expected to be Weetabix, the cereal maker.

Another tranche of companies will join the AIM next year, as the Unlisted Securities Market closes in December 1996.

Any company can join AIM, whatever its size, activity or age, and there is no minimum amount of shares that must be issued to the public. This means that, in theory at least, entrepreneurs can raise money for no more than a bright idea as long as a broker and adviser can be persuaded to act and the prospectus contains a convincing enough case for investors.

The Stock Exchange said: "Every effort has been made to keep down the cost of being on the market, and the rules and application process are as simple as possible."

But, as a statement from the Exchange conceded last September, "The key is to find the appropriate level of regulation necessary to attract investors who are prepared to accept a higher level of risk."

The debate since then has centred on finding an acceptable compromise to encourage companies to accept enough regulation to give investors sufficient protection.

Andrew Beeson, at Beeson Gregory, the stockbroker that is one of the nominated advisers, said: "There is an option to come to the market at relatively little cost. But from an institutional standpoint there is little demand for that type of product."

So far, the big institutions have stood back from the launch hype. Like many company directors, they are waiting to see what happens.

AIM debutants

Name Activity

Athelney Trust investment trust

Brancote Holdings mining

Country Gardens garden centres

Dawson Holdings newspaper wholesaler

Formscan document equipment

Gander Holdings property

Lorien job agency

Norcity II property

Norhomes property

Old English Pub Co pub operator