Taking AIM: A continually attractive proposition for international companies

United Kingdom

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

To coincide with the 20th anniversary of the London Stock Exchange’s AIM, international law firm Olswang has composed a compendium of articles that highlight AIM’s ascent in becoming a hugely successful small cap marketplace and how companies and global sectors have grown as a result. From the explosive growth of technology and retail companies listed on AIM to thousands of both domestic and international company IPOs, examines the past, present and future of companies listed and looking to float on this rapidly growing marketplace.

Throughout the last 20 years, the London Stock Exchange’s AIM has grown massively – from 10 members to becoming the home of 1,074 companies with a combined market capitalisation of £75 billion. While the platform has been one of tremendous growth for domestic companies, it has also become a beacon for international companies looking to make their mark in one of world’s largest financial centres.

According to its 2015 report, AIM now comprises companies operating in more than 100 countries in 40 different sectors – from Indonesian gold miners and Thai energy exploration companies to Chinese pharmaceuticals and Zambian agri-businesses, among others.

Companies in the Asia-Pacific region in particular are joining AIM because local listings require significant cost and time when factoring in the “supervision” and required permissions from various levels of local government, and an IPO on AIM can prove significantly quicker and inexpensive. In fact, just this year Olswang advised Chinese seafood supplier Aquatic Foods Group Plc, counselled advisers to Myanmar internet-based mobile service company MySQUAR Ltd on their AIM admissions as well as is currently working with a healthy pipeline of international companies.

What attracts international companies to list on AIM?

AIM’s relatively simple admission process and rules (AIM Rules) are tailored to suit the needs of fast-growth companies and make it an attractive platform on which to float. Benefits that often appear attractive to international companies include:

  • No requirement to have an office or management based in the United Kingdom;
  • No minimum admission criteria in terms of company size, prior trading record, number of shares to be in the public hands or minimum market capitalisation;
  • No minimum on funds raised (unless the company is an investing company, in which case it must raise at least £3 million);
  • No securities regulator involvement in the IPO process – on-going regulation of AIM companies is set at a level intended to create and maintain investor confidence;
  • Access to international capital and act as a springboard to Europe;
  • Simplified rules designed to reduce the administrative burden surrounding corporate transactions; and
  • Simplified mechanism for raising secondary funds.

Analysts believe international companies are likely to continue to play a big part in the future growth of AIM. It is also expected that larger businesses than have traditionally been the case will want to be associated with it. Certain sectors, such as oil and natural gas, mining, minerals, renewable energy and technology, to name a few, are predicted to remain attractive to investors on AIM in the short-to-medium term.


AIM’s largely institutional investor base comprises many international names one would expect of a market that has demonstrated its growth potential, such as Fidelity, Merrill Lynch, Blackstone and others. If these institutions are investing on AIM then international companies can expect a knowledgeable and enthusiastic audience and one with significant financial muscle.

What should international companies know before seeking admission to AIM?

The benefits listed above often entice international companies, however there are many other factors and due diligence to consider before the expected date of admission to AIM, such as:

  • The company must publish either, as appropriate, a prospectus or an admission document in accordance with AIM Rules and the Prospectus Rules.
  • Where shares are being offered to the public in the UK, a prospectus is needed, and the approval of the UK Listing Authority is required.
  • At least 10 days before the expected date of admission to AIM, the company must provide the LSE with certain information specified in AIM Rules, such as details of the number and type of shares, significant shareholders, directors and proposed directors and the names and addresses of the Nominated Advisor (NOMAD) and the broker.
  • A company’s shares must be freely transferable (subject to limited exceptions).
  • The company’s shares will need to be eligible for electronic settlement, and the main electronic system in the UK is CREST, operated by Euroclear UK & Ireland Limited. The shares of non-UK companies would ordinarily be settled through CREST by using CREST depositary interests (issued by CREST).
  • Where a company’s main activity is a business which has not been independent and earning revenue for at least two years, it must ensure that all related parties (including directors, their associates and shareholders who hold 10% or more of the company) and applicable employees (those who either alone or with members of their family hold 0.5% or more of the company) must agree not to dispose of any interest in their shares in the company for a period of one year from the date of admission to AIM.
  • There must be a sufficient free float (although this is not a requirement per se in the AIM Rules) and if the company is an investing company, it must, as a condition of its admission, raise a minimum of £3 million in cash via an equity fundraising on or immediately before admission.
  • Once admitted to AIM, a company incorporated in a non-EEA country may publish annual audited accounts in accordance with IAS, US, Canadian, or Japanese generally accepted accounting principles (GAAP) or Australian International Financial Reporting Standards.
  • A half-yearly report also needs to be prepared.

AIM at 2015 and beyond…

Balancing the certain frothiness in the market in 2015 was necessary and inevitable, and we should not ignore that fact. However it’s also true that after a long period of depressed trading, market participants are ready for a period of sustained activity. Investor confidence can go a long way in underpinning the market and, provided the international companies seeking to float are realistic about valuation and have solid management behind them, there is every reason to believe that quality AIM IPOs will continue to find a receptive audience. Many of the smallest companies on the market have delisted, whether as a result of acquisition or in less happy circumstances, leaving the field to a group of higher quality companies with healthier market capitalisations.

An obvious area for growth arises from AIM’s appeal to smaller international companies which are considering a public listing, but are increasingly unlikely to make a splash on markets such as NASDAQ. It is generally accepted that a company with a market capitalisation of less than $500 million will struggle to make a significant impression on that market.

By comparison, on AIM, where the average market capitalisation is in the region of $100 million, relatively smaller companies can get much more attention and are more likely to receive solid research coverage.

AIM, with its lighter regulatory touch, allows such companies to raise public money and carry out reasonably significant transactions without the need for onerous filings or too much red tape. By contrast, the regulatory burden on SEC reporting companies, including those listed on NASDAQ, is often disproportionate to their size and can be very costly. An AIM listing can thus offer smaller international companies the bridge they need to access public finance and cut their teeth on the public markets before seeking a dual listing on other markets when they are of a size to do so.

AIM is therefore a reasonably well-trodden path already and likewise, potentially offers UK investors the chance to participate in international companies operating in a jurisdiction where cultural and linguistic barriers are generally low and corporate governance standards are typically high.

Also read about how retail companies have evolved on AIM in the first article in Olswang's Future of AIM series.