The PLUS side of flotation

PLUS-quoted is more than holding its own in a difficult market struggling to launch growth businesses, writes Jonathan Pearce of Marriot Harrison.

A total of thirty-six companies joined PLUS in 2008, taking its number to 214. Since the turn of the year, a further six have joined and there are applications for another seven. This means admissions are set to equal, or possibly exceed, the figures for new entrants for 2008.

We have a number of clients in the process of making applications, so our experience alone indicates that there are several more to come.

Conversely, the London Stock Exchange’s growth platform AIM is going through a necessary period of change, which will see it continue to lose many of its smaller companies. In doing so, although it may end up much reduced in size, it should become stronger. It just has some pain to endure on the way.

Joiners and leavers

Although a comparison with AIM has to be taken in context – AIM has just over 1,500 companies compared with the 220 on PLUS – it is interesting to note that
in 2008, 228 companies de-listed from AIM (more than the total number of PLUS companies) and 70 companies were admitted. This represents a net loss of 148, or roughly ten per cent. During the same period, PLUS had as many joiners as leavers.

There are a number of factors behind the comparatively strong performance by PLUS. One of which is that it’s gaining more attention internationally.

Two of the companies we have advised which have become PLUS-quoted this year follow this trend. TradeLabs Plc was the first company to become PLUS-quoted in 2009 and was admitted with a market capitalisation of £40 million. TradeLabs is a Jersey company whose business is run from Dubai and Singapore. Another was Frontier Resources International Plc whose business operations are run from Texas. PLUS’s international standing is continuing to grow even in a very low market.

Cost savings

Another reason behind the figures is that some companies, such as Secora Plc are migrating from AIM to PLUS. Cost is clearly a force for change. Given that, in the current market, fundraising and liquidity are difficult issues for both AIM and PLUS, the cost of achieving and maintaining a public market for shares is now an increasing significant factor in companies favouring PLUS. One of our clients seeking to de-list from AIM reckons that it will save about £200,000 a year by doing so.

Market profile

PLUS is gaining a more defined position in the market. Its regulation aims to be appropriate to the size and scale of the company and it is in a position where it is growing and can vet new applicants, while at the same time, AIM is saddled with an increasing number of strugglers.

To that extent, even though the market conditions are horrible, timing is favourable to PLUS as it can learn from the experience that AIM is going through where more than 20 per cent of its companies have a market capital of £2 million or less and 35 per cent have a market capitalisation of £5 million or less.

Finally, it would seem that PLUS is now successfully managing to attract companies of a size that one might previously have thought would head straight for AIM. TradeLabs, for instance had an initial market capitalisation of £40 million, proving the appeal of this alternative platform.

Nick Britton

Nick Britton

Nick was the Managing Editor for when it was owned by Vitesse Media, before moving on to become Head of Investment Group and Editor at What Investment and thence to Head of Intermediary...

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