Considering listing on AIM? Consider risks & rewards: London's Alternative Investment Market has been successful in drawing companies, with more than 1,680 currently listed. U.S. companies seeking escape from the more restrictive and regulated U.S. exchanges need to scrutinize both the pros and cons of an AIM listing.

• Author: Partigan, John C.
• Position: CAPITAL MARKETS - Alternative Investment Market

The appeal of the London Stock Exchange's Alternative Investment Market, known as AIM, as a destination for emerging growth companies, has been a popular topic recently. AIM was established in 1995 as a place for smaller companies to raise capital and develop a market following under a less rigid regulatory umbrella. In the wake of the passage of the Sarbanes-Oxley Act of 2002, AIM has received increased attention as a market for companies that do not wish to list in the U.S. and, consequently, be subject to the increased regulation and scrutiny that has resulted from Sarbanes-Oxley.

Indeed, AIM has been successful in drawing companies. More than 1,680 companies are listed on AIM, and the market had success in attracting international companies. In 2007, AIM listed 347 non-U.K., or international, companies, up from 304 in 2006. Almost 60 U.S. companies are listed on AIM, up from five just four years ago.

From the perspective of a U.S. company with growth prospects, does a listing on AIM make sense? There are a number of potential advantages and drawbacks that directors and officers of U.S. companies should consider.

AIM: A Brief Overview

The main appeal of AIM for U.S. companies is the less restrictive regulatory and oversight environment and the lower disclosure requirements. AIM is also attractive to U.S. companies for cultural and linguistic reasons. Other commonly noted advantages of AIM, when compared to other markets, include these requirements:

* No minimum number of shares or market capitalization;

* No minimum price-per-share trading. By comparison, Nasdaq's market for smaller companies, the Nasdaq Capital Market, requires a share price of at least $1;

* No prior regulatory review of an admission document (a document similar to a prospectus) prior to listing;

* No prior revenue history needed;

* In most cases, no shareholder approval is needed for transactions (reverse mergers are an exception); and

* At least one analyst covering the company.

Establishing a listing on AIM can also be done faster than the time typically required for other markets. A company seeking admission on AIM will, among other things, have to prepare an admission document, retain a Nominated Advisor, or Nomad, and appoint an AIM broker. In general, the admission process can take from three to four months, depending upon the type of company and the amount of due diligence required to produce the admission document.

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The admission document...