Attracting more retail investors could give companies quoted on PLUS a real boost next year. James Harris reports

Attracting more retail investors could give companies quoted on PLUS a real boost next year. James Harris reports

In a year where there has been plenty of bad news in the financial markets, the PLUS stock exchange sees reason to be optimistic.

Low investor appetite and a frozen IPO pipeline have meant that stock exchanges around the world have suffered for most of 2009. However, 16 new companies have joined PLUS this year, along with six new corporate advisers, who will continue to bring more new companies to market in 2010.

PLUS Markets’ Vivienne Cassley says: ‘If you’re trying to raise funds, it has been difficult in any market and PLUS is no exception’. However, in total this year, 130 PLUS companies have raised secondary funding – money raised by companies already on market, usually from existing shareholders. Companies that raised cash on admission included 3D Diagnostic Imaging, which raised £2 million and Worship Street Investments, raising £1.3 million.

Cassley adds: ‘People think of share prices crashing during a recession, but there have been some really good stories on PLUS.’ Companies including Parry People Movers and Avation have seen increases in their share price of over 50 per cent during the year, whilst NCI Vehicle Rescue rose over 100 per cent. PLUS also established itself as the market for “non-standard” products with the admission of Barclays Nuclear Notes – a complex transaction which facilitated the takeover of British Nuclear Fuels by EDF.

One of a growing number of international admissions this year was pension and financial IT services provider Arrowpoint Technologies, the exchange’s first company from India, which joined in October.

‘The market has been difficult in the UK but other parts of the world have been slightly less affected by the recession. Our focus is to build a critical mass in the UK, but we are also seeing more interest from international companies, particularly those based in China and the Middle East,’ Cassley adds. Another international success is Singapore-based aircraft leasing concern Avation, whose market capitalisation has increased from £745,000 on its admission to PLUS in 2006 to £9.7 million at the end of 2009.

PLUS also offers a platform for acquisitive CEOs. As Cassley points out, companies can use their shares to finance deals, and a listing provides high visibility and an independent valuation. In addition, unlike the Full List, PLUS does not require companies to seek shareholder approval for an acquisition, unless it is a reverse takeover. Infrastructure company ANS Group, for example, has made three acquisitions since it was admitted to PLUS in 2000 and now has a market cap of £15 million.

Cassley says: ‘It’s one of the benefits of the quoted model. It would have been very costly and time-consuming for ANS to seek approval for every deal.’

Taking AIM

It is not just a challenging market environment that PLUS has had to face this year. The exchange was involved in a legal dispute with LSE over the trading of AIM stocks on PLUS. After resolving the dispute in August, PLUS no longer needs to have direct dealings with AIM companies to trade their shares. The effects were immediate, with 8.7 billion shares traded on PLUS in the month the disagreement was resolved, an increase of 102 per cent on the previous month.

The continued increase in trading volumes during the year is largely derived from retail order flows: in other words, individual clients as opposed to pension funds trading blocks of shares. For Cassley, this provides crucial support to PLUS’ target market: ‘Retail trading tends to support smaller companies, providing much needed visibility. They don’t tend to see a great deal of day-to-day volume from institutional investors.’

There are some differences between AIM and PLUS, not least in terms of cost. While AIM companies can expect to pay some £200,000 a year including adviser fees, PLUS companies pay around £40,000 on average.

The exchange also takes a different approach to regulation. On AIM, nominated advisers (nomads) are at the centre of the admission process, whereas on PLUS the in-house regulatory team likes to be more hands-on. Cassley says: ‘The team looks at admission documents and they interview board members before a business comes to market. We want to encourage well managed companies which comply with our regulations. We will reject companies which do not meet our standards.’

Emboldened by the ability to trade AIM shares, and having navigated through turbulent market conditions, PLUS is attracting more attention from businesses and corporate advisers alike. Cassley says: ‘We’ve been very pleased with how PLUS has held up in the current conditions. Our trading volumes have doubled since June and we’re seeing a growing number of enquiries from new companies, as well as some strong performances from our existing companies.’

To contact Vivienne Cassley click here
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