Debt's Dead But Equity's Alive at London's AIM Stock Market

By: Rob_Kirby

We all read and hear about it 24 / 7 – whether it's in the papers or on CNBC - credit markets have seized-up for all but sovereign risk. The mainstream financial press is continuously bleating, “Money is tight or unavailable”.

Heck, I read papers and watch t.v. – so I even started to believe the bleats. That is, until a good friend – a private investment banker friend based in California – contacted me last month informing me that he had teamed with a couple of U.K. based investment bankers to raise equity stakes on London's AIM Market.

I remember bristling at the thought and saying to him, “The equity markets are dead too, aren't they?”

Well, apparently not. According to the latest issue of The Global Guru in an article titled, How London Overtook New York ,

“Last year there were 419 new listings on the London Stock Exchange versus only 36 on the NYSE and 138 on NASDAQ. The value of European takeover deals out of London this year will likely eclipse the value of deals done in the U.S. ”

These numbers are nothing short of stunning.

As my investment banker friend, J. Douglas Bowie told me,

“Public equity financings and / or pre-public equity financings are not only feasible – they're currently being funded on the London AIM Market [Alternative Investment Market].”

He and his team are currently pursuing opportunities on behalf of clients who want to raise development and / or expansion funding, with a view to having a listed public company on the AIM Market.  The team has been involved in varying aspects of 19 AIM financings in recent years.

Currently, the “sweet spot” when it comes to capital raised on the London AIM for clients is between $35 and $150 million.  Hot flavors of the month are hydro-carbon, health / medical services, alternative energy projects, mining projects, real estate, technology projects and media / entertainment projects.

In addition, The London Stock Exchange is currently actively promoting an off-shoot of The AIM Market, called The Specialist Fund Market [SFM].  The SFM is designed to accommodate such entities as single-strategy hedge funds, multi-strategy hedge funds, fund of hedge funds, private equity funds, property investment funds, infrastructure funds as well as sophisticated legal structures and security types (such as LPs, PCCs, non-voting shares)."

Process

The AIM Market is Institutional, not Retail.  Capital placements on the AIM Market are determined by specialists called Nominated Advisors [Nomads] who represent, among other fund sources, the Venture Capital Trusts [their clients].

Individual Venture Capital Trust [VCT] Investments are 200,000 British pounds in size each.  The investor gets an immediate 30% tax refund.  These investments are managed by the banks and the funds must be invested within a very short time (3 months) in qualified investments.  There are only 2 qualified investments: Private Placements, or IPO AIM stocks.  Because of the current state of almost all public markets, "Nomads" are investing these funds in pre-IPO Private Placements with the qualification that the company execute an IPO on the AIM Market within a negotiated period of time. 

These funds are piling up at an unprecedented rate.

The "Nomads" are currently having lunch with each other because there are few takers.

This is due to people's market perceptions that markets are currently "locked down". 

This is not true of the London AIM Market today.  Therefore, the potential, immediate opportunity now is enormous for the right investment project!

By Rob Kirby
http://www.kirbyanalytics.com/

Rob Kirby is the editor of the Kirby Analytics Bi-weekly Online Newsletter, which provides proprietry Macroeconomic Research. Subscribers to Kirbyanalytics.com are benefiting from paid in-depth research reports, analysis and commentary on rapidly unfolding economic developments as well as recommendations on courses of action to profit from chaos. Subscribe here .

Copyright © 2008 Rob Kirby - All rights reserved.

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