Comparison of markets - AIM & NASDAQ
The AIM market of the London Stock Exchange Plc, is London's secondary market for young and growing companies. Since its inception, over 1,800 companies have joined AIM with a growing proportion coming from overseas jurisdictions. Over US$19.4 billion has been raised to date on the AIM market of which funds raised for non-UK companies total more than US$2.18 billion.
AIM's admission requirements and ongoing regulation are less onerous than that of other capital markets - they are set at a level which is intended to be stringent enough to maintain investor confidence but not prohibitive for young companies considering joining the market. Unlike NASDAQ or the NASDAQ Small Cap Market, AIM does not have any minimum entry criteria regarding market capitalisation (although generally companies have market values of between US$1.82m and US$90.76m), company size, trading history or number of shares to be held in public hands. This makes AIM an attractive market both domestically and internationally.
A company admitted to AIM will enjoy the benefits provided by a flotation on any other market:
- ability to raise capital for working capital or research and development
- a trading facility for shares which enables a valuation
- ability to encourage employee commitment by making share schemes attractive
- increase in ability to make acquisitions, using quoted shares as consideration
- increase in press coverage and public reporting to enhance profile
Member companies can be incorporated in any country and it is possible to admit all types and classes of securities.
Companies listed on AIM tend (where possible) to follow the corporate governance rules set down for companies listed on the main market of the London Stock Exchange Plc, although technically there is no requirement for AIM companies to do so. This tradition of corporate governance is critical to the AIM market's integrity and for maintaining investor confidence. It should be noted that the UK approach to corporate governance is by way of guidance rather than legislation and thereby affords flexibility especially to the small cap market. In contrast, following Enron and Worldcom, the US adopted a legislative approach to corporate governance in the form of Sarbanes and Oxley which raises serious issues of liability. In light of this, it is not surprising that a NASDAQ listing is proving to be less attractive when compared to the AIM market.
It should be noted that overseas companies currently listed on certain markets may be able to gain entry via the "Designated Markets Route". This will allow admission to AIM without the need to produce a formal admission document. This process can facilitate a dual listing on AIM or the transferral of a listing to AIM. The nine current Designated Markets include NASDAQ, NYSE and the Toronto Stock Exchange.
As AIM specialists, recent deals Finers Stephens Innocent LLP have advised on reflect the trend for overseas companies to list in the UK. In 1996, lead partner Ashley Reeback acted for the one of first US companies to list on AIM, West 175 Media Group INC., and the team have worked on a range of international listings, involving companies from the USA, Israel, Brazil, Ireland and the emerging markets.
COMPARISON OF NASDAQ vs AIM REQUIREMENTS
NASDAQ |
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AIM |
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Minimum entry criteria - market capitalisation, company size, trading history, number of shares to be held in public hands |
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No minimum entry criteria (although generally companies have market values between US$1.82m and US$90.76m) |
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Legislative approach (Sarbanes Oxley) - raises serious issues of liability and is inflexible |
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Guidance approach - most companies follow the rules for companies listed on London Stock Market, but this approach offers flexibility |
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Always need to produce a formal admissions document |
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Not always necessary - may be able to gain entry via the "Designated Markets Route" |