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20 February 2008
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.
The main reasons most companies give for obtaining a listing are to:-
A London listing has a number of attractions.
Main Market
AIM
Minimum public float
25% of shares in public hands
None
Market capitalisation
£700,000 (in reality at least £100m and ideally £200m or more)
None (in reality at least £10m and 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
None although shareholders may invest through ISAs
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
Shareholder approval for transactions
Class tests require shareholder 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
Only for reverse takeovers (broadly 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
Other conditions for listing?
Primary adviser
A sponsor must be appointed
A nominated adviser or ‘nomad' must be appointed
Cost of listing
Minimum: £700,000 - £900,000
Typically 7-10% of funds raised
Minimum: £250,000 - £300,000
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 information update
Obligation to publish insider list and annual information update
Not applicable
Announce half year results
Within 2 months of the end of the first six month period of the financial year
Within 3 months of half year end
Publication of full year accounts
Within 4 months of the end of the financial year
Within 6 months of year end
Interim management statements
Unless an issuer publishes quarterly 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
Directors' aggregate remuneration and that of the highest paid director
Number of independent non-executive directors (excluding the Chairman of the board)
Three
Two
Limit on non pre-emptive share issues
5% per annum (or 7.5% in 3 year period)
10% per annum commonly accepted by institutional shareholders
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.
Companies considering listing in London should be aware of a number of obligations which are common to both fully listed and AIM listed companies:
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.
Ben Simpson
DD: +44 (0)20 7597 6136
Email me
Alan S. Jacobs
DD: +1 212 848 9864
Guy Facey
DD: +852 3711 1604
Anthony Indaimo
DD: +39 02 290 660 200