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Taking AIM At The UK’s Alternative Stock Markets

Beyond The LSE’s AIM, Not A Lot Of Choice In Markets For UK Retail Equities Investors

by Frank Quin

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For most prospective stock market investors, looking to take the plunge for the first time, attention will invariably be focused on the main board of the London Stock Exchange (LSE), and companies in the FTSE 100 or other leading indices of listed stocks. And so it should, because that market and those companies – by and large – represent the cream of the British equities markets. Companies which are admitted to the Official List of the LSE have gone through rigorous scrutiny both by the exchange itself and the UK Listing Authority (alter ego of the Financial Services Authority).

But for the investor with a taste for something more exotic – or risky, or both – there are other markets and other stocks which at least in principle are available for investment. We take a look at the murkier end of the UK’s equities markets – the exchanges and the companies whose shares are traded on them.

Scilly Isles Suit You?

You might, for example, fancy a stake in the Scilly Isles tourism industry. In which case, on the last business day of every month there’s an auction of shares in Isles of Scilly Steamship Company Ltd, which operates freight, ferry and air services to the UK mainland, in the market operated by Asset Match (www.assetmatch.com) for private company securities. But there were no trades in Isles of Scilly Steamship Company shares in April.

Or A Silly Share Price

Or what about a punt on a professional football club? You could do worse than Arsenal Holdings plc (ISDX:AFC), which operates the well-known Arsenal Football Club and related businesses (eg, the Emirates Stadium) and which is listed on the ‘Growth Market’ of ISDX, formerly PLUS. In April this year, some eight shares in Arsenal Holdings changed hands – in eight separate trades – with a month-high of £1.6 million per share, rather putting them beyond the reach of most equities investors.

No, if it’s a football club you want, pretty much the only practical offering these days is Manchester United plc (NYSE:MANU). But you can’t buy its shares on any UK-resident stock exchange – they’re listed only in New York. In principle, there should be ADRs (American Depositary Receipts) available for purchase on the LSE but the club’s listing structure – with the Glazer family’s controlling stake carrying 10 times the voting power per share of the listed stock – disqualifies it from a UK listing.

So let’s take a closer look at the markets which do operate out of the UK, so that you can buy – and sell – shares in sterling, and a sample of the companies they attract.

AIM

Captive To The Establishment

The first thing to know about AIM – the Alternative Investments Market – is that it is wholly owned by the London Stock Exchange and therefore very much part of the ‘establishment’ in UK equities trading. Launched in 1995, AIM provides an easier and a cheaper route to exchange-traded status and its attraction on those scores is borne out by the market’s impressive growth since its inception. The 121 companies which had listed by the end of 1995, including just three offshore entities, were capitalised at £2.38 billion. As of April just gone, AIM had 1,088 active listings – including 222 international – and a market cap of £62.06 billion, still well down on the peak of nearly £80 billion reached in 2010 before the UK sank into recession.

And AIM is soon likely to become even more ‘mainstream’, with the government moving towards its inclusion – likely to be in the autumn – in approved ISA (individual savings account) investments. To this point, AIM has been denied ‘regulated market’ status under UK financial regulation law, meaning that the stocks of companies listed only on AIM or at least not also listed on a regulated market within the European Union cannot be included in an ISA stocks and shares portfolio. Their inclusion was mooted in 2012’s Autumn Statement as a way of stimulating fresh capital for SME and tech start-up enterprises in the UK.

AIM Successes

Which was of course the original idea behind AIM – a way in which companies lacking a track record, or sufficient size or shareholding spread, or which had embarked on risky ventures, could nevertheless attract investor capital, in large measure because of the liquidity afforded by a functioning market in such stocks. So AIM stocks were and still are seen as higher risk than those on the Official List of the LSE. And yet AIM has had some spectacular success stories. A leading contender for a ‘greatest AIM success’ award would have to be Uramin, the uranium ‘re-mining’ venture established by mining entrepreneurs Jim Mellon and Stephen Dattels in 2005, reputedly with just £100,000 capital between them, listed on AIM and acquired by French nuclear power giant Areva two years later for $2.5 billion. (The fact that the enterprise subsequently tanked in Areva ownership is neither here nor there.)

Uramin was a highly speculative venture which happened to succeed, at least while AIM-listed. But the exchange also provides a home for companies which make things that people want to buy and which, perhaps after initial teething troubles, have grown in size and earnings per share while on the exchange. A case in point is PureCircle Ltd (LON:PURE), headquartered in the United States – as indeed are a growing number of AIM listings – and which produces natural sweeteners from the plant stevia. Listed late in 2007, the company recently announced an 80 percent hike in revenues (from $15.2 to $27.4 million) for the first half of its current financial year, reflecting growing sales of its branded sweeteners into the global CSD – carbonated soft-drink – market. Its share price has been climbing steadily since the low of 81 pence reached in August 2011 and the 300p at which it closed on 13 May puts it back at the post-listing high achieved in April 2010. Its market capitalisation of £493 million puts PureCircle just inside the AIM’s top-20 listings.

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