Listing On London’s Alternative Market Provides an Alternate Offering Route

Monday, March 13, 2006

Kenneth Lamb, Judith Shepherd, Justin McAnaney, and, Gibson Dunn & Crutcher, http://

Better Business Management & Planning Practices

Abstracted from: Why US Companies Should Consider AIM
Gibson Dunn & Crutcher, London, England
International Financial Law Review - Vol. 24, No. 11, Pgs. 39-42

Counting the benefits of AIM.
The Alternative Investment Market (AIM) is a lightly regulated stock market set up by the London Stock Exchange to provide an alternative to smaller issuers seeking to raise capital at lower cost. Attorneys Kenneth Lamb, Judith Shepherd, Justin McAnaney, and Oliver s'Jacob urge American companies to take a closer look at this listing alternative. An AIM offering does not require 1933 Act registration with the SEC, periodic 1934 Act filings, or compliance with the Sarbanes-Oxley Act. An initial public offering on AIM generally takes three to four months rather than the typical six months required for an IPO in the United States. The initial fee is approximately $7,500, a bargain compared with NASDAQ's charges of $100,000 to $150,000. After the offering, AIM requires semi-annual rather than quarterly financials. AIM has no requirements for minimum market capitalization, shareholders' equity, per-share bid price, earnings, or trading volume. The market is flexible, allowing for innovative transactions. Listing on AIM provides US companies with visibility to customers and suppliers in Europe. Mature private companies that cannot go public on NASDAQ may particularly benefit from a public offering on AIM.

Not ideal for every situation.
AIM is not suitable for every issuer. Shares listed on AIM generally are less liquid than shares trading on more established markets, the authors point out. Furthermore, AIM-listed issuers that make offers to UK investors will need to comply with UK and EU securities regulations. Although listing on AIM does not compel the US issuer to comply with the UK corporate laws (such as the corporate governance and takeover rules), the issuer might be well-advised to do so for the comfort of its British investors.

Ensuring compliance with US securities laws.
US issuers seeking to list on AIM still need an exemption from registration under federal and state securities laws. The authors advise that 1933 Act Regulation S provides an exemption for securities sold outside the United States. Under Reg. S, the issuer may not offer domestically the shares sold on AIM, although the issuer could make a simultaneous private placement to accredited investors in the United States. AIM offering documents and share certificates must contain a legend indicating the restrictions on ownership by US persons. For one year after the offering, AIM purchasers may not sell to US investors but can to accredited investors. American non-affiliates who purchased shares in the United States may resell their shares after two years on AIM or elsewhere. Once the company has assets of $10 million and 500 or more shareholders, the US issuer must register and make filings under the 1934 Act and comply with the requirements of Sarbanes-Oxley.

The mechanics of listing.
To list on AIM, the authors explain, the issuer must select a nominated advisor (or "Nomad") from a list provided by the London Stock Exchange. The Nomad assists in preparing the AIM admission document and determines whether the issuer is suitable for an AIM offering. The London Stock Exchange and the UK Listing Authority do not play an active role in offerings made through AIM to fewer than 100 retail investors. Although less onerous than the SEC registration requirements, the AIM admission document requires disclosure about the company's business, financial condition (including three years of audited financial statements), affiliates, and the shares being sold. The admission document is used as the offering document unless a full prospectus is required because there are more than 100 retail investors. While a Nomad must approve an issuer's offering on AIM, the UK Listing Authority will need to approve any required prospectus. The issuer must provide at least 10 business days' notice that it intends to list shares on AIM, must disclose updated financial information every six months, and must disclose important developments on an ongoing basis. AIM rules require shareholder approval only for reverse takeovers and sales that would fundamentally change the company's business.

Abstracted from International Financial Law Review
published by Euromoney Institutional Investor PLC
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