Today London's AIM market is arguably the leading global market for growth companies with 472 overseas businesses listed on it. To date Australia (44), Canada (44) and the US (39) have provided the most companies to AIM.
But with at least 25% of the Alternative Investment Market populated by overseas businesses (the practice of adding a UK top-company prior to listing reduces this total number), has AIM become a victim of its own international success? Research from Baker Tilly and Faegre & Benson suggests that some AIM investors believe that the quality of companies coming to AIM has been compromised by an influx of overseas IPOs. However, companies listed on AIM did not agree, claiming that globalisation has been a benefit to the growth market
The Taking AIM research showed that 49% of a sample of 51 institutions invested in AIM cited the globalisation of AIM as generally detrimental, but only 12% of those polled thought the increased number of overseas companies was a factor in contributing to AIM's poor performance in 2006.
However, conversely the globalisation and heightened awareness of AIM has been well received by companies listed on the market, with 60% out of a sample of 203 AIM quoted companies, claiming that the globalisation of AIM has been generally beneficial to them.
Chilton Taylor, head of capital markets at Baker Tilly suggests these perceptions might have been encouraged by the heavy weighting and poor performance of the AIM resources sector in 2006: "In 2006 resources stocks on AIM fell by a combined 14% and with resources companies traditionally based overseas this drop in valuation may have adversely impacted the perception of international companies on AIM."
Not surprisingly, overseas companies were more likely to have considered listing on other stock markets, with 42% of overseas companies vs. 15% of UK companies having initially looked beyond AIM. The principal overseas options considered were NASDAQ and the Toronto Stock Exchange.
Looking forward, the research revealed that 10% of polled investors cited too many overseas companies coming to market as one of the main threats facing AIM over the next 12 months.
Moreover, the high profile competition for company IPOs amongst stock markets, led to 14% of investors and 21% of companies claiming that increased competition from other stock markets will be a key potential threat to AIM going forward.
Chilton Taylor stressed, "AIM has excelled in its ability to attract international companies, but in order to build on this success, all market participants must seek to ensure that the quality of companies coming to AIM is maintained."
Melanie Wadsworth, a partner in the London Corporate Group at international law firm Faegre & Benson LLP said: "The AIM market clearly has an opportunity to take the lead in the global market for growth companies at the moment. However, to maximize this opportunity our survey findings make it clear that there is a need for more induction training as part of the IPO process, particularly with regard to Investor Relations. Keeping your company front-of-mind in a noisy marketplace is key for companies looking to maximisethe advantages that an AIM listing has to offer – and good Investor Relations are central to this. This is important for AIM companies' individual success, but also for the competitiveness of the AIM market itself in the global competition for listings.'