Ambitious entrepreneurs dream of floating their businesses on the stock market. Aside from the thrill of the challenge and the chance to test their business nous to the highest degree, floating on AIM is a way for businesses to raise finance, which can be particularly useful at a time when banks are reluctant to lend.
Most SMEs, when they float, do so on the Alternative Investment Market (AIM), which is subject to less regulation.
AIM is London’s “junior” market, the younger sibling to the London Stock Exchange (LSE) and attracts young companies looking to go public.
The AIM market is targeted at SMEs and is focused on companies that have the potential for growth whether by acquisition or organically and which require capital in order to expand.
Before floating on AIM
Company owners considering floating on AIM should first assess their goals.
There are four main reasons to list on AIM: to raise capital; to inject liquidity into the company’s shares; to raise the company’s profile; and to facilitate acquisitions through shares.
There are crucial steps that must be undertaken to prepare for a listing.
1. The company is about to become a public entity, even if the number of shares released is very small. This means the business will be scrutinised by potential investors and their advisors, as well as the media, and it must be equipped to handle this pressure.
2. Companies must be able to provide a prospectus, which will include all financial details, history and forecasts. This should also include the reasons behind the decision to float and the terms of the share offer.
3. Management also needs to have long-term objectives in mind, and be prepared to work towards these, generating interest and liquidity in its shares. This doesn’t happen automatically.
4. Additionally, the company needs to consider whether it might need to change its group structure, whether there might be any obstacles to listing and whether its board has the requisite skills to manage and govern a listed company.
Later this week, we’ll be covering the listing process and how you know whether listing on AIM is right for you.