The capital markets are a dicey topic, but U.S. companies should be ready when they reopen, according to Bryce Linsenmayer, partner for Haynes and Boone LLP. He spoke at the recent London Stock Exchange (LSE) and Alternative Investment Market (AIM) breakfast seminar in Houston. “I think we are all beginning the see the green shoots of recovery,” he said.
The AIM exchange exists in a regulatory environment designed specifically for new and small-cap companies. Linsenmayer noted that there is definitely a sense “that things are beginning to turn,” and said that executives are finding the LSE and the AIM exchange markets “a great place to do business,” especially for U.S. producers wanting to go public.
In 2008, of the top five categories of business sectors raising money on AIM, the oil and gas sector ranked third, attracting some £5.9 billion in investments, close behind the real estate and mining sectors.
In the past, most U.S. energy companies seeking to raise $20- to $30 million by issuing equity listed on Nasdaq, he said. As that exchange increased in stature, and with the advent of Sarbanes-Oxley reporting requirements and the U.S.’s increasing regulatory and litigious environment, “lots of U.S. companies have found London to be an infinitely preferable place to become a public company, largely due to the financial center’s stock exchanges and associated financial, legal and accounting community.”
Anne Moulier, business development manager, Americas, for the London Stock Exchange, said, “The London exchanges’ advantage over New York’s is their attraction to global investors.” Although there are more funds under management in New York than in London, there are more international funds allocated to the London exchanges—about $2 trillion worth.
LSE recently launched AIM Italia, and plans to launch AIM Tokyo in the next few years to further expand its international investor base.
To serve globally based clients, the listing regulatory framework is more open, she said. There is no minimum company requirement for size, financial history or amount of publically held shares. Also, transactions do not require shareholder approval.
Over the past few years, emerging markets have provided the main engine for the London markets’ economic growth. In 2006, there were more IPOs on LSE (about 367) than on NYSE, Nasdaq and Hong Kong combined (about 332), in part due to the exchange’s low-cost admission and annual fees and lower costs for institutional placings.
About 80% of the 1,478 companies currently traded on the LSE-group exchanges listed on AIM, she said. AIM has fewer entry requirements, a flexible regulatory regime, a small-cap institutional investor base and various tax benefits. In spite of the 2008 financial crisis, the AIM market raised $6.4 billion (about $90 billion since 1995) and saw 38 IPOs, said Moulier. Prior to the crisis, AIM raised $31.4 billion in 2006 and $32.4 billion in 2007.
U.K.-based Matrix Corporate Capital, a broker and advisory firm, has been involved in $1.3 billion of capital raises over the past three years, with a significant portion of that raised through AIM.
“The process of coming to market through AIM is quick,” said Louis Castro, head of corporate finance. Typical time from strategy to flotation is about three to four months. The firm’s advisors act as nominated advisors for firms wishing to go public, he said. The typical all-in IPO cost averages about $1 million, with about 4% going to the advisory firm for commission.
—Jeannie Stell
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