Cost of listing on Aim soars

LISTING costs on the Alternative Investment Market (Aim) continued to climb last year despite a slump in the number of initial public offerings (IPOs) on the market, pushed up by concerns over a tightening in the regulatory environment.

The cost of listing on Aim reached an average of 7.24 per cent of funds raised in 2009, research from accountants UHY Hacker Young and law firm Trowers & Hamlins shows. That compares to seven per cent of funds in 2008 and just 6.1 per cent back in 2005, prior to the marked explosion in the number of companies listing on the junior market in the boom years leading up to the financial crash.

UHY Hacker Young partner Laurence Sacker pinned the blame on the widespread regulatory crackdown on the financial markets

“There is a cost to businesses when a regulator like the FSA publicly states that we should all be ‘very frightened’ of it,” he said. “While the London Stock Exchange is responsible for much of the Aim-related work it is the politicians and the FSA who have set the mood.”

He added: “Fears over regulatory retribution if an Aim IPO goes wrong is a bigger driver of the costs of listing than the desire among advisers to win work by competing on price.”

The jump in due diligence costs comes in spite of a 66 per cent fall in the number of flotations on Aim last year, which was down to just 13, from 38 in 2008. Investor confidence in notoriously volatile small cap stocks has been severely dented over the course of the financial crisis, causing a dramatic fall in the number of floats and an exodus of companies delisting from the market.