In conclusion, the biggest difference between a US listed company and an AIM listed company; NO Sarbanes-Oxley compliance. Listing on AIM eliminates the SEC governmental review process of the prospectus, the multitude of periodic regulatory filings and mandatory financial reporting requirements.

The reason US and foreign companies are flocking to AIM is because the companies can not find underwriters in the US. Why? Because their deals are too small and the inherent risk is too great for the underwriter! There is a reason the average IPO in the US last year raised an average of $229MM. Those stats reveal a couple of startling realities: a) underwriters are only interested large deals and b) the average company going IPO in the US has an approximate market cap of $800MM. This leaves emerging growth companies with very fewer options. If a company can not qualify for listing on a US exchange they have three choices:

1. Go public via a Direct Public Offering (“DPO”). This involves no broker dealer and the company is the issuer. This process can upwards of one year. The company can then try to raise capital via a PIPE transaction once they are trading on the OTCBB.

2. Back your company into an OTCBB shell. It is fast and you can be public in about 60 to 90 days. You can then raise capital via a PIPE transaction.

3. Listing on AIM gives an emerging growth company the opportunity to go public and raise capital for reasonable fees and under reasonable terms and conditions.
   The only downside to listing on the AIM is that you are basically non existent to US investors and exposure the US capital markets.

I hope you have enjoyed this seven part series. For additional information please contact Ralph Amato at 858 729 0075 or email Ralph@ventanacapitalpartners.com

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In the U.S., the IPO or DPO prospectus has to go through several SEC comment letters and responses before the company’s registration statement can become effective (approved). The Company must then either file a 15-C2-11 with FINRA to gain trading status on the OTCBB or if it qualifies and is raising capital through a broker dealer it must qualify for listing on NASDAQ.

The process is much more simplified to list on the London Stock Exchange. There is no regulatory authority in the UK – it is the responsibility of the sponsoring Nomad. As a result, the entire process is substantially faster and cheaper than a comparable transaction in the U.S. The prospectus must fully disclose all information that an investor needs in order to make an informed investment decision. In most cases the prospectus is generally less comprehensive than an SEC-filed registration statement and the review process, for the most part, is non existent.

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The Nominated Advisor or “Nomad” acts as the sponsor or representative of the company who will be listed on AIM. The Nomad prepares the prospectus and gets the issuer admitted for trading on AIM. The Nomad also assists the company is raising its initial capital, the sweet spot being the $10MM and $20MM US range. Nomads may also (through its brokerage and research departments) provide market making and research for the issuer’s stock. The contractual arrangements and relationship between the issuer and its Nomad extends well beyond the IPO. Unlike its US counterparts, the Nomad is still active after the initial listing on AIM so that a small issuer does not end up being a stock market “orphan,” as is often the case in the U.S.

On February 20, 2007 the Aim instituted some new rules for Nomads and companies listed on the AIM exchange. The rules were implemented to give further guidance and clarity to regulatory issues concerning disclosure requirements. Although the changes to AIM rules are evolutionary rather than revolutionary, Nomads should not under-estimate the Exchange’s emphasis on the responsibility of Nomads for preserving the reputation and integrity of AIM.

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AIM, operated by the London Stock Exchange, tends to work best for companies that have a capitalization and valuation from $20MM US to $300MM US. Filing or entry costs, excluding fundraising, are approximately $600,000 US, with ongoing yearly costs of around $100,000. Capital raisings activities tend to be in the $4MM to $40MM US range with the average cost of capital at approximately 9%. Investors are largely institutional; however there is a higher percentage of retail investment than on the official list. Substantial investor tax benefits may be applicable as AIM stocks are deemed “unlisted” and “unquoted”.

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AIM is designed primarily for emerging growth companies that have a global reach and a higher investment risk. AIM is somewhere between an OTCBB and a listing on NASDAQ small cap. However, the listing rules are significantly different than listing in the US markets.

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You can purchase a shell with as little as 51% delivery and as much as 99.9% delivery of the issued and outstanding common and preferred shares of stock. The lower the delivery the lower the price of the shell. As of this writing a shell with 51% delivery will cost between $550K to $650K. A 99.9% delivery shell complete with non affiliate shares will cost between $750K to $850K. So what is the difference?

The 51% shell will require, in most cases, a reverse split of the stock along with the reverse merger. This usually involves a significant amount time and attorney fees. You will have to file an 8K and later a Proxy or Information Statement with the SEC. If you choose the new methodology of contacting your shareholders via a postcard you will have to wait a minimum of 40 days from the day you mail the postcard notice.

The 99.9% shell usually involves a forward split versus a reverse split. Certain states of incorporation do not require a Proxy or Information Statement be sent to shareholders when you performing a forward split of the stock. The reason is that the Company is issuing shareholders additional shares versus taking shares away from them. Secondly, if the Company and non affiliate investors have purchased 99.9% of the shares the likelihood of a shareholder complaint is usually slim and next to none.

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