Secondary Offerings / Independent Equity Research
By virtue of the fact that London’s AIM caters to small and medium-sized, growth-oriented companies, a handful of companies do exceptionally well, some tread water and many perform below initial expectations. The main challenge for those in the latter category is raising additional capital in a secondary offering on London’s AIM. At this stage, there is often a disconnect between the type of investor the company’s Nominated Broker is able to access (i.e. larger institutions) and the type of investor that may be interested in the company (i.e. smaller institutions, private client brokers and/or high-net-worth individuals).
A possible solution, particularly if the company’s Nominated Broker is no longer providing equity research coverage, is the engagement of one of the half dozen firms in London that provides independent equity research as a service. While the research is paid for by the London AIM-listed company, this is well understood in London with the readership viewing the research as credible. The extent of services provided by the Independent Equity Research firm can be tailored to the London AIM-listed company’s needs, however, it is important to engage with a firm that has analysts with deep expertise in your industry and that focuses on companies of your current market capitalization.
The power of independent equity research is in its wide distribution, as opposed to the Nominated Broker’s more narrow distribution to their trading clients, and the ability to analyze the readership download activity. Once the readership amongst London-based institutions, private client brokers and high-net-worth individuals is determined, specific strategies can be devised to address those parties. The benefits are two-fold; to organize a targeted secondary offering on London’s AIM and to increase liquidity in the shares for the longer term.