Graham Dallas, Senior Manager International Business Development at the London Stock Exchange, discusses London's appeal for Israeli companies.
In 2005, the London Stock Exchange's international business grew dramatically. Excluding issuers from the UK, 139 companies from 29 different countries joined London markets. Most of these transactions were on AIM (Alternative Investment Market), which had its most successful year ever with a total of 519 new listings.
Israel has become one of our most important international markets. In 2005, 18 Israeli or Israel-related companies joined AIM, and two others joined the Main Market. The current year has begun strongly, and London now seems firmly established as the favored route to the public markets for Israeli issuers.
AIM's expansion has reflected, in large part, its simplified regulatory environment, which has been specifically designed for the needs of smaller companies. AIM has a wide and diverse range of companies from all business sectors from young, venture capital-backed businesses to more established expansion-minded firms in sectors such as manufacturing and real estate. These companies have sought listing on AIM for a variety of reasons:
- to access capital for growth, both at the time of flotation and subsequently in order to finance organic growth and/or acquisitions
- to create a market for their shares, broadening the shareholder base
- to offer existing shareholders an exit and the opportunity to realize their investment
- to provide an objective market valuation for the business
- to raise their profile and visibility and enhance their status with customers and suppliers around the world
- o obtain currency in the form of shares to make acquisitions
- to reward and encourage employees through the introduction of share incentive programs
- to increase credibility with a high quality and broad range of investors
- to participate in an appropriate peer group of publicly traded companies
A unique advantage of an AIM listing is that it offers the benefits of being traded on a public market, but within a regulatory environment specifically designed for smaller companies. Its advantages include:
Accessibility. Unlike most other markets, AIM does not stipulate minimum criteria in relation to company size, track record, balance sheet or free float. Instead, all prospective companies need a nominated adviser ("Nomad") from an approved register that ensures a company's suitability for AIM and its readiness to be admitted to a public market. The Nomads (of which there are currently 84) are corporate finance firms, approved and regulated by the London Stock Exchange.
A simple admission process. In most cases there is no pre-vetting of the admission documentation, which saves time and expense. Part of the Nomad's role is to take responsibility for coordinating the admission process alongside the company and other advisers, such as lawyers and accountants. The Nomad carries out extensive due diligence to ensure the company is appropriate for AIM and that all the necessary information about the company is included within the admission document. The Nomad also takes responsibility for ensuring that the company's documentation, processes, structures and corporate governance meet the standards demanded by AIM rules.
Regulation for smaller companies. All AIM companies are required to disclose details of their financial performance through scheduled interim and full-year announcements of results. In addition, a company is required to make disclosures on an ongoing basis about other developments that might have an impact on the future performance of the company and/or its share price. However, in most cases, AIM companies are not required to produce further documentation when effecting acquisitions or divestments, thereby enabling a company to expand or change direction quickly.
An international focus. Since its launch, AIM has attracted over 260 international companies. For international companies, admission to AIM not only provides access to capital and a broad range of investors including significant institutional capital but also helps raise a company's profile in order to expand operations into new overseas markets.
AIM investors and the secondary market. Once a company is admitted to AIM, trading commences, and the share price and trading data are visible across the Exchange's information network of 90,000 terminals worldwide. Trading in AIM stocks takes place on the trading systems of the London Stock Exchange and is subject to the same surveillance and oversight as all London Stock Exchange markets. Liquidity is underpinned by a system of competing market makers who undertake to quote a buy and sell price during market hours. All AIM companies have at least two market makers. In many cases, the Nomad also acts as a market maker.
AIM attracts a broad range of investors. As the market has grown and matured, it has gained recognition, and nearly all UK (and increasing numbers of US) fund managers are now able to invest in AIM stocks. Most of the money raised in AIM IPOs come from institutional investors. It is important that companies develop a relationship with this essential stockholder group as part of an AIM quotation.
Indexes. The FTSE AIM UK 50 tracks the 50 largest UK issues, while the FTSE AIM 100 includes both UK and international issues. Additionally, there is the FTSE AIM All Share index. All these indexes are now managed using best practice methodologies based on free float, liquidity and weighting. These indexes have improved secondary market liquidity and the profile of AIM companies.
AIM in Israel. In 2004, three Israeli companies joined AIM (Orca Interactive, Nipson Digital Printing Systems and Servision). In 2005 there were 18 new Israeli-related companies (Adamind, Amiad Filtration, Bateman Engineering NV, Dori Media, Empire Online, Engel East European, F.T.S. Formula, Gilat Satcom, Global Brands, Ki Bi, Leadcom, Metal Tech, Orpak, PolyInformation, Telit Communications, Tescom, Vigilant Technology, and Visual Defence). Interest continues to be strong, and more London-based nominated advisers are actively looking for new opportunities among Israel's corporate community. A number of these advisers have formed links with Israeli firms: Bridgewell with Poalim Capital Markets, Altium with Tamir Fishman, and KBC Peel Hunt with MG Equity. In the first six months of 2006, eight more Israeli companies joined AIM.
In summary, AIM offers a cost-effective and successful public market for small and mid-sized companies. Supported by a professional and competitive community of advisers, managed by the London Stock Exchange, and invested in by some of the biggest funds, it offers a global platform for young growth companies.
Information
If you would like to find out more please visit our Web site, or contact Graham Dallas +44-207-797-4055;
Email: gdallas@londonstockexchange.com