AIM For The Stars
Posted on: 19 May, 22
Clark laments about the failure of the UK to build technology powerhouses, and Oury offers up that if you want to aim big, and don’t want to break your ARM escaping the handcuff of Private Equity... go to AIM
Sorry O, I just was thinking I may as well chop my arm off given what the UK seems to do with its technology superstars. ARM Holdings - one of the greatest companies we have ever produced, we sold to SoftBank - who then decided we needed to expand in China. Set up there and just handed out the technology under their absurd 51% ownership by Chinese locals. So not only did we lose it to SoftBank - they gave it away to the Chinese!
Yeah and the worse bit is we let it happen, and thought it was a good news story of Brexit. “Oh look - people still want to nick our crown jewels! Lucky us! Do you think maybe they want to come stay in London still so they can try and take a swipe at the Queens precious pearls”
Exactly. What’s the point? It was once said that the company who wins is the one with all the money, and therein lies the problem. The US, or somewhere, always has more money than us. So, their companies (even if they are not as good) just destroy our beautiful little tech gems. They are able to buy up the British version, or out compete it, and meanwhile we all have to go back to the garden shed to complain, drink and see if we can come up with a new kind of toaster.
can you?
can you what?
Come up with a new kind of Toaster? I don’t know about you - but I have a range of issues with mine. I mean the bread doesn’t always fit, and I can never actually find the right setting...
Oury!
Sorry, just it would be handy
The point is - are we doomed? Once you have got past start up and a few Venture Capital rounds, are we bound to have to try and sell it to some big US Private Equity firm at best? They offer a better valuation, with the pockets to scale us beyond Watford, Ealing and Hemel Hempstead?
Don’t knock Hemel Hempstead it’s got a lovely Pavilion I saw Eric Clapton there once.
It’s gone - the council knocked it down.
RIGHT THAT’S IT… I’m writing a letter immediately.
Yeah, I mean we can’t even keep a small pavilion functioning - let alone build a tech business from start to finish like the Titans of America. Hell, even Sweden seems to have more successful tech companies than us.
Well Mr Clark. I have some news that could just brighten your day.
You’re leaving for Acapulco, and I get your house?
Nope. Slightly worrying response. But no. No, what I want to tell you is what cheered me right up. The UK now has the most attractive way to raise money for scaling technology companies in the world.
Booolllloc...
Uh ahh… Yes we do. Have you ever heard of AIM?
As in “AIM”- The Alternative Investment Market. Also known as the London Stock Exchange little mini market? The scrawny younger brother of the LSE and the FTSE?
Yes, my friend. That’s the one - BUT - This is not 1995 anymore. AIM is an incredible route for a company to take, and not just British companies. It is now one of the best and more popular routes for companies from around the world - especially the US and Canada. Indeed 47 of 823 of its companies listing on AIM between 2017-2021 are international, and 31% of all companies are International.
More B word. Okay smart arse - start talking and make some sense that isn’t B word.
Okay - So let’s imagine we are some sexy start up, and we’re from anywhere really. Australia, USA, France.
Not France.
okay not France - but anywhere else. We have done SEED money, we have had VC money, we have a proven business model, and we are growing fast. We need money on tap and we need it regularly. We have got to a scale that people are starting to talk about £40m valuations, hell someone mentioned £60m… but Barry thinks we are really £20m. But no one likes Barry because he’s always been a pessimistic short sighted miserable...
OK! Got it.
What are our options? We can go to Private Equity. Probably in America where most of them are. They will probably be interested. We might get a weekend in Vegas.
Persuasive.
But the deal works like this. One big fat investor who will pump us full of money, lock us in for 3 years while we buy up the competition, fly around in fancy jets and feel all important - but upset our employees, and ruins your brand. It will probably work. Enough money you can do all sorts of things, but it is the end of the company as we know it, and we will probably end up hating it. Everything except the Vegas bits.
Ok. Nothing wrong with that. Well, maybe there is - but at least you are dealing with one party and don’t have to go through the agony of running and LISTING A PUBLIC COMPANY you numb nuts!
And here is where you are wrong. Raising money with one big fat investor isn’t easy. Hell, some people argue it’s even harder. Loads of hoops and paperwork and Due Diligence and Auditors and Lawyers. Lots and lots of lawyers to just drive you ….
Oi watch it Ms fancy pants accountant - you lot are a right drag too
Okay - but lots of hoops and B-word. Then when it is all done - you lose control, you probably get a nice pay out, but the company becomes a big corporate machine hell bound on growth and acquisition - with you strapped to its front like that scene from the Titanic as it smashes into the Iceberg, and everyone blames you. It’s all Private Equity knows how to do - it’s what they do. Hell, when they go to the bar - they don’t buy a drink - they buy the bar!
Okay - but still what’s so good about listing a company. A) this company doesn’t sound big enough B) regulation regulation regulation C) I’m pretty sure I read every day how these tech companies are tanking on the London Stock Exchange.
Yes, the main market is struggling to find its feet with Tech, but AIM. AIM is a different story. First, you can get the same or better valuations than a US Private Equity would offer you. Second, you can take up to 10-20% of your money off the table when you list. Most markets allow 1-2%. But AIM it is normal that the existing shareholders take a big slug off the table. No problem. Third, the regulation and costs are much reduced. It’s a pain, but it’s basically a big Audit, you need a Chairman, a CFO a NOMAD and a Broker and a good lie down at the end - but you will get it done... Fourth, AIM qualifies for all tax reliefs in the UK - EIS or no Inheritance tax on the sale of shares under Business Property Relief. It’s very investor friendly - and Fifth - and let’s not forget the big jammy donut bit of this … You’re a CEO in control deciding what course to take. Whether to fire Jeremy or invade Uzbekistan.
Okay not bad… still sounds like a pain in the…
Oh and the biggest thing of all - once listed you can do another raise in days. Not weeks. Not months, not years. Days. My client rang me up from the US - he wants to list as his mate just raised £20m in a week - and he could almost kill him after 8 months of VC meetings.
How on earth?
Basically AIM investors are all big institutions. They are sophisticated and must put some of their money in AIM. If you want to raise money - you are already audited, you are already public, you are on the exchange. Your NOMAD.
NOMAD?
Basically like your spiritual mentor for the exchange. Your guardian, advisor and general drinking buddy to get you through the whole experience and encourage you to give up cigarettes and get a new Chairman, and a proper CFO.
Okay I am just going to accept that nonsense because frankly everything in high end banking is gogo gaga speak.
Good. So basically, your Nomad makes some calls - tells them that you are raising again. You turn up to some meetings - spot of lunch - and before you know bish bash boom - you’ve raised again. Average raise is £49m at IPO - but between £1-5m there is more liquidity in AIM than anywhere else in terms of markets. Investors are sophisticated and understanding of the realities of business. They are like your Uncle Ian who knows that life isn’t that simple…
How the hell did you know about Uncle Ian. It’s not all true you know - he’s going to get acquitted of that time with the hair curler and the sheep…
I just don’t’ know what to say Clark…
Okay fine - so it’s a groovy place to list - maybe maybe maybe. But you could go raise money on the Nasdaq, the Toronto Stock exchange, the Australian Stock exchange - if you were international - why in devils donuts would you come all the way to London to list?
Nasdaq you need to be huge, and it costs an absolute fortune, and the chances are you would flop after IPO. Toronto Stock Exchange - yeah - well - can’t do all the cool stuff I said - get some money of the table, raise quickly. ASX struggles to find a market and is full of public investors who understand mining mostly. But - I don’t want to start insulting everyone. Let me put it this way. More than 52% of AIM listing companies are trading positively after IPO vs 23% on Nasdaq and 25% on the Toronto Venture Stock Exchange.
Are you saying that maybe, maybe, that listing on our small exchange on this small little island - may make you bigger and most successful than being on a Giant Exchange on a Giant Continent?
Yes - basically I am. Don’t take my word for it - ask around. AIM is a hot ticket, and makes public listing make sense. Keep control, build your dream, look after your team - and buy a Yacht on the side. What is not to like?
Okay persuasive. But just to clarify is there a Toaster company that will list on AIM and solve my bread related crisis?
Oh you never know… one might pop up.
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We are but two fictitious characters throwing out ideas and comment to stimulate debate and collect information. As professional service firms, we are open minded people and think independent thought and debate is essential to help understand, as well as navigate, complex problems. By joves – doing business across Europe (and the world) is set to become a whole lot more complex in light of recent seismic political events. As businesses - we provide information and hopefully some wisdom - and we see this blog and its caricatures merely as a much more fun, perhaps slightly controversial way, of stimulating debate and collecting ideas. We’re searching for some true pearls of wisdom, and as we find them, we’ll share them with you.
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CLARK! What the hell are you doing with that paper guillotine? I know it’s been a while since we’ve been in the office, but you are not supposed to put your arm in it!