Ready, AIM, Finance:
Why Targeting Alternate Sources of
Investment Capital Brings Strategic Value as Well as Cash to the Business
By BioLauncher Ltd.
Biotech
companies can raise cash and create other opportunities to grow and advance
their business by bringing forward their IPO plans and looking to some of the
secondary equity markets. The London Stock Exchange's (LSE) Alternative
Investment Market (AIM) market is an attractive target for growth companies
seeking access to capital. AIM is operated by the LSE and offers companies great
value for money, and a less burdensome regulatory environment than the main
board.
Why AIM Finance is Smart Finance
The concept of “smart money” is well understood by management teams seeking
venture capital investment. However a public offering delivers capital with
“strategic capacity” that increases a business's options for growth in a number
of ways.
1 - It delivers capital to the business at the IPO, but also creates a
capability to undertake additional capital raisings via subsequent share issues.
In 2005, Evolutec plc (AIM:EVC) raised £9.5M as a follow on financing. North
American companies should note that PIPE investments are not yet offered on the
London markets.
2 - It broadens the shareholder base, and provides existing investors with a
fair market value for their investment. An AIM transaction makes most sense when
viewed primarily as a financing event and not a liquidity event. Management
teams are reporting more attractive valuations for their business from the AIM
community at IPO than they are being offered by UK venture investors. A positive
trend is the increase in trading volumes on AIM as appetite for AIM securities
has increased, suggesting that the liquidity issues are diminishing.
3 - It provides a mechanism to incentivise employees through share options.
Biotechnology businesses succeed through the commitment and excellence of their
employees. The ability to offer employees traded shares differentiates the
company from others at a similar stage of development.
4 - It creates the option of growing the business by acquisition. Once
management teams are in possession of traded paper, the possibility to buy
synergistic businesses and plug gaps in intellectual property portfolios or
product pipelines becomes very real. AIM's rules on acquisitions are designed
specifically to facilitate growth by acquisition which can be an excellent
mechanism for achieving a foreign market entry.
5 - It raises a company's profile which increases the possibility of achieving a
trade sale which is the preferred exit for many investors in the current
environment. Last year BioFocus plc (AIM: GLPG) was acquired by the Dutch
company Galapagos NV.
6 - A listing enhances the company's reputation amongst suppliers and potential
collaborators but also within its peer group.
AIM's Cost, Regulation and Process Advantage
AIM quoted companies enjoy the benefits of a public listing within a streamlined
regulatory regime resulting in substantially reduced the compliance costs. The
annual fees for non-domestic equities are the same as the admission fees,
currently $7524, regardless of the size of the company or the volume of shares
traded.
On the LSE main market, the regulatory authority is the UK listing Authority (UKLA),
which fulfils a role that is similar in some respects to the Securities and
Exchange Commission (SEC) in the US. For AIM companies the regulatory authority
is devolved to the company's appointed Nominated Advisor aka Nomad. The Nomad is
responsible for evaluating the company's appropriateness for the market and
ensuring that after listing the company remains compliant with the AIM Rules.
(It should be noted that AIM listed shares are not registered with the SEC,
which makes it illegal to offer to buy or sell, or make a solicitation of an
offer to buy or sell the company's securities to a US person under the US
Securities act of 1933.)
Any company meeting the admission criteria can join AIM. The process is designed
to be straightforward. An AIM quotation typically takes about 4.5 months from
project kick off to completion.
Other Considerations
To achieve an AIM listing and maintain its strategic capability thereafter,
companies need communication strategies that raise the profile of the business
and management in Europe. This means growth phase companies will need to access
sophisticated international communications expertise that can balance the UK
perspective against the business's need to build and maintain a consistent
global profile.
For more information on the AIM market, please contact BioLauncher at
info@biolauncher.com.
Biotech
companies can raise cash and create other opportunities to grow and advance
their business by bringing forward their IPO plans and looking to some of the
secondary equity markets. The London Stock Exchange's (LSE) Alternative
Investment Market (AIM) market is an attractive target for growth companies
seeking access to capital. AIM is operated by the LSE and offers companies great
value for money, and a less burdensome regulatory environment than the main
board.