9th February 2017

AIMing high - a fast track to capital

The oil & gas sector has fared little better, with prices in 2015 hitting decade lows as Saudi Arabia turned on the taps to put pressure on more marginal producers in the US.

The oil & gas sector has fared little better, with prices in 2015 hitting decade lows as Saudi Arabia turned on the taps to put pressure on more marginal producers in the US.

This has meant many listed junior natural resources companies have struggled, particularly on the Australian Stock Exchange (ASX) and Toronto Stock Exchange (TSX), where there has historically been less liquidity and a smaller capital base than on the London Stock Exchange's AIM Market.

Sector on the up in 2017?

Things may be looking up in 2017 for miners as the commodities stock piles that depressed prices have not been replenished due to cut backs in production, and demand becomes more closely aligned with supply than in the recent past.

There has been positive news for oil & gas producers too, with the long-awaited OPEC deal at the end of 2016 to cut production (the first in eight years) likely to have an upward effect on the oil prices in 2017. This could mean there will be greater interest in junior natural resources companies from investors.

The question for junior miners is how to convert this market interest into hard currency to build mines and drill wells. One route might be to try and raise some capital in London through the AIM Market.

Why come to AIM?

The AIM Market is the most successful growth market in the world, and continues to help smaller and growing companies raise the capital they need for expansion.

There are around 1,000 companies listed on AIM, with a combined market cap exceeding £80bn and over £3.5bn is raised by companies on or joining the market each year. This is combined with a diverse and highly knowledgeable institutional investor base, as well as a retail market that can be tapped, creating a large pool of liquidity and capital. Retail interest, in particular, has grown over the last few years as it has become possible for AIM stocks to be included in individuals’ ISA tax-free wrapper - and ISA allowances themselves have increased.

With around a third of companies on AIM having their operations outside the UK, and natural resources companies representing one of the largest sectors on the market, overseas mining and oil & gas companies are well understood in London.

So why do overseas issuers need to list in London to tap the London capital markets? London investors increasingly want to see an adherence to UK corporate governance standards and a commitment to London, which usually translates into a London listing. Often London institutional investors like issuers to visit them and keep them updated on developments, which companies are more likely to do if they have a base (even a virtual one) in London. Investors also like the idea of having a nominated adviser (Nomad) to keep a company in check, which is a pre-requisite for joining AIM.

AIM listings: more straightforward than you might think

Back in May 2003 AIM introduced a simplified fast-track admission process for international companies already listed on other “AIM Designated Markets” including ASX and TSX. This route has not been utilised as much as was expected as it is not well publicised. However, it is potentially attractive to listed overseas issuers as it allows for admission to AIM with only a detailed pre-admission statement rather than a more lengthy admission document. Therefore a secondary listing on AIM can be obtained at a lower cost than a new IPO on AIM and usually in a quicker timescale.

The admission criteria for AIM are also more flexible than many people might imagine. For instance, there is no minimum market capitalisation for trading companies and no minimum trading history. At least 12 months’ working capital is needed and having a Nomad and broker are two of the main requirements. The AIM Regulation team is usually keen that there is a UK investor base too (although there is no prescriptive requirement for companies outside China); at least 10% of shareholders being UK based is a good rule of thumb.

For further information and advice on how the fast-track process works, or for introductions to the AIM adviser community in London, please contact Jonathan Morris, Corporate Partner at Thrings.


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