Obtaining a London Listing - AIM vs Main Market
20 February 08
Listing in London?
The main market is the London Stock Exchange's principal market for listed companies from the UK and overseas. It currently has
approximately 1,600 companies listed including over 300 international companies. In 2007, 264 companies listed in London
compared with 298 on the New York Stock Exchange and Nasdaq combined. In 2007 companies on the London Stock Exchange
raised US$87 billion compared to US$15 billion on the New York Stock Exchange and US$20 billion on Nasdaq.
The AIM market of the London Stock Exchange (AIM) is targeted at growing international companies. In 2007, 284 companies
joined AIM, 182 of which were IPOs and a total of £6.5 billion was raised in new issues. There are approximately 1,700 companies
(including more than 350 international companies) whose shares are traded on AIM.
Why list and why in London?
The main reasons most companies give for obtaining a listing are to:provide access to capital for growth
encourage employee commitment
create a market for their shares
increase a company's ability to make acquisitions
obtain an objective market value
create a heightened public profile
enhance status with customers and suppliers
A London listing has a number of attractions.
The London Stock Exchange is the largest stock exchange in Europe and the world's most internationally focused
London is a global financial centre - all the major banks have offices in London
The great majority of all IPOs on Western European exchanges take place in London
London is well known for its high standards of regulation
What are the main differences between AIM and the Main Market?
Main Market
AIM
Minimum public float
25% of shares in public hands
None
Market capitalisation
£700,000 (in reality at least £100m None (in reality at least £10m and
and ideally £200m or more)
ideally £20m or more)
Trading History
3 years
No minimum requirement
Accounting standards IFRS or equivalent
IFRS or US, Canadian, Japanese
or Australian GAAP
Tax incentives
Incentives under UK tax legislation
include relief under the Enterprise
Investment Scheme, relief from
inheritance tax, the ability of
venture capital trusts to invest in
some AIM companies and
corporate venturing reliefs
None although shareholders may
invest through ISAs
Shareholder approval Class tests require shareholder
Only for reverse takeovers (broadly
for transactions
Other conditions for
listing?
approval for a Class 1 acquisition
(broadly speaking acquiring or
disposing of a company or assets
worth more than a quarter of the
company's value) or on a reverse
takeover
At least 75% of the company's
business must be supported by a
historic revenue earning record
covering the last 3 financial years
speaking, acquiring a company or
assets worth more than the AIM
company) or transactions resulting
in a fundamental change in the
company's business, board or
voting control
The company's shares must be
freely transferable and eligible
for electronic settlement
The company must control and
have controlled its assets for the
last 3 financial years
The company must be carrying
on an independent business as
its main activity
The total of all warrants or
options to subscribe for equity
shares must not exceed 10% of
the company's issued equity
share capital
The company's shares must be
freely transferable and eligible for
electronic settlement
Primary adviser
A sponsor must be appointed
A nominated adviser or ‘nomad'
must be appointed
Cost of listing
Minimum: £700,000 - £900,000
Minimum: £250,000 - £300,000
Typically 7-10% of funds raised
Typically 8-12% of funds raised
Ongoing costs
Higher fees for sponsors, auditors,
lawyers and non-executive directors
in view of greater continuing
obligations. Typical cost of
maintaining listing is £300,000 £400,000 p.a.
Lower fees for nomads, auditors,
lawyers and non-executive
directors in view of lesser
continuing obligations. Typical
cost of maintaining listing is
£150,000 - £250,000 p.a.
Lock-in requirements
None in theory, but in practice at
least six months
One year for a start-up and in
practice one year for most AIM
companies
Insider List and annual Obligation to publish insider list and Not applicable
information update
annual information update
Announce half year
results
Within 2 months of the end of the Within 3 months of half year end
first six month period of the financial
year
Publication of full year Within 4 months of the end of the
accounts
financial year
Within 6 months of year end
Interim management
statements
Unless an issuer publishes quarterly Not applicable
financial reports, its management
must release a statement during the
first 6 month period of any financial
year and also during the second 6
month period
Disclosure of
remuneration
Detailed directors' remuneration
report
Number of independentThree
non-executive directors
(excluding the
Chairman of the board)
Directors' aggregate remuneration
and that of the highest paid
director
Two
Limit on non preemptive share issues
5% per annum (or 7.5% in 3 year
period)
10% per annum commonly
accepted by institutional
shareholders
How much does a listing cost and what advisers do you need to appoint?
Costs
The total average fees for a main market or AIM listing depend on the nature of the company coming to the market as this affects the
nature and level of due diligence required. The base level for admission costs for all advisers would normally be in the region of:
Main Market: £700,000 - £800,000
AIM: £250,000 - £300,000
On top of these fees, the company will need to pay the broker's fees for raising the funds (unless listing by way of an introduction),
which may be in the region of 4-6% of funds raised.
Advisers
The key advisers that a company needs when seeking a listing are a sponsor in the case of admission to the main market and a
nominated adviser or ‘nomad' in the case of admission to AIM.
We would be happy to recommend sponsors and nominated advisers to you. The sponsor or nominated adviser will carry out due
diligence on the company and its directors to assess whether or not they would like to sponsor the company and to ascertain
whether the company is suitable for a listing.
A company will also need to retain a broker (although many sponsors and nominated advisers will also be able to act as broker).
Other advisers who will be involved in a float are lawyers to the company, reporting accountants, lawyers to the sponsor or
nominated adviser, public relations advisers, printers and registrars who will administer the register of members. We can give a
company an indication of likely costs levels, which in part depend on the nature of its business.
What are the common obligations for fully listed and AIM companies?
Companies considering listing in London should be aware of a number of obligations which are common to both fully listed and AIM
listed companies:
The company's shares must be freely transferable and eligible for electronic settlement
Restrictions on dealing - no dealing in the 2 months prior to publication of half year and full year results and insider dealing and
market abuse rules apply
Filing of accounts - accounts need to be filed within six months of year end
Retirement of Directors - in practice, the nomad or sponsor will require one-third of the board to retire by rotation each year
Notice Period - best practice is for directors' service contracts not to have notice periods in excess of 12 months
Remuneration of non-executive directors - best practice is for non-executive directors not to be remunerated in shares or share
options
Length of service of non-executive directors - best practice is for annual shareholder approval of any non-executive director who
has served on the board for more than nine years
Shareholder approval - shareholder approval for substantial property transactions with directors and connected persons.
Conclusion
More established companies not wanting to grow through a series of acquisitions may prefer to go directly to the main market.
Smaller acquisitive companies may prefer to list on AIM to avoid seeking shareholder approval for transactions. The tax breaks for
AIM companies may also increase investor appetite for an AIM company's shares. The likely market capitalisation and investor
appetite are often the deciding factors, particularly given the greater cost of obtaining a main market listing.
© Withers 2016