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Why are Australian companies attracted to AIM?

• FROM: July 2006 |
• TAGS: australian stock exchange, bdo stoy hayward |
• COMMENTS: Add yours

• Why are Australian companies attracted to AIM?
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AIM remains popular amongst Australian companies and the number of Australian companies seeking an AIM IPO is continuing to grow.

Australian companies are now the second most represented on AIM with a total of 45 having obtained a listing since 1997. Of these, 29 have listed since 2005 raising £181 million, nine of these were in the first five months of 2006.

The mix of companies covers a number of sectors. Not surprisingly natural resources is the most represented, accounting for 47% of those listed, and has recently been the most active both on AIM and on the Australian Stock Exchange (ASX) where over 50% of new listings in 2006 were resource or energy companies. Of the remaining Australian companies on AIM, a wide range of sectors including biotechnology, IT, gaming and speciality finance are represented.

So why are Australian companies coming to AIM? Every company has a different reason but there are some underlying motives. The opportunity to raise funds on AIM is greater than that on the ASX. In the first five months of 2006, 130 companies
raised £4.1 billion on AIM compared to 61 companies listing on the ASX raising £0.9 billion. Excluding larger fundraisings on both markets, the average fundraising on AIM for the first five months of 2006 was around £12 million compared to £5 million on the ASX.

This ability to raise larger amounts can also be an advantage to companies already listed on the ASX. A number of companies who have raised sufficient funds on the ASX to develop their initial business plans can look to AIM for a more significant fundraising, potentially not supported in their local market. One sector where we have seen this as being particularly relevant is biotechnology, which represents around 2% of AIM’s market capitalisation, and a sector where AIM investors have a
good knowledge base and a willingness to invest.

If a company is not in a sector with a particular focus for UK investors, the decision to list on AIM will be concurrent with an intention to expand operations internationally. In these instances, apart from raising the funds in pounds to cover currency risk for a European expansion, the profile of having an AIM listing supports the strategy by improving credibility and profile in local markets. The recent growth in the number of Australian companies coming to AIM can also be attributed to increased regulation and compliance costs associated with listing in the US, which, as for US companies, makes AIM more attractive. As a result we are currently seeing a wider cross-section of companies considering AIM including wine distribution and homeland security businesses. We expect that this is a trend that will continue with the continuing success of AIM, awareness of the market in Australia and as companies continue to look to expand outside the Australian
domestic market.

BRENT GOLDMAN is a Corporate Finance Partner at BDO Stoy Hayward, who specialise in International IPOs.

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