Dual identity

In May 2003, the London Stock Exchange, as part of its drive to attract international companies, introduced a new fast-track route to admission to listing on AIM. Companies whose securities were already listed on an AIM designated market  for at least 18 months prior to the date of admission to AIM were able to apply to be admitted without having to publish an admission document (the AIM designated market route).

AIM itself was launched in 1995 and has raised almost £24 billion for growing companies. Companies are attracted by its flexibility, less stringent regulation compared with other markets and no requirements for minimum capitalisation or number of shares issued to be in public hands. AIM is the most successful growth market in the world, and since its launch companies from across the globe have chosen to list on AIM.

The AIM designated market route was expected to make it easier and quicker for overseas-listed companies to access institutional investors in London as well as the wider European capital market. Eight years have now passed since its introduction, and to mark this anniversary Trowers & Hamlins conducted research into dual-listing on AIM.

Dual-listing
Our research, conducted for the period May 2003 to April 2011, shows that, out of the 1,164 companies listed on AIM, there are currently 73 dual-listed companies, more than one-third of which are dual-listed on one of three exchanges – Toronto (15 per cent), Australia (12 per cent) and the Channel Islands (12 per cent).

How many markets are dual-listed companies listing on?
Our research also shows that the vast majority (85 per cent) are listed on two markets, with only 15 per cent listed on three or more. The reasons for this depend largely upon individual circumstances, but in the light of the cost, time difference and compliance difficulties of listing on more than one market – the most notable being that price-sensitive information must be made public to the markets as soon as possible and synchronised in all jurisdictions where the securities are listed to ensure a level playing field for investors – the case for doing so must be reasonably compelling. 
 
Listing using the AIM Designated Market Route
Of the 73 dual-listed companies, 38 listed on AIM first. Of the others, 21 listed on AIM subsequently and 14 listed on AIM and another market at the same time. We also found that 14 out of the 21 companies admitted to AIM subsequently were already listed on an AIM designated market and, therefore, were able to utilise the AIM designated market route.

With 14 out of the 21 companies able to use the AIM Designated Market route (representing 67 per cent), it is clear that the scheme has had relative success in attracting those companies eligible to use it. An example is Wasabi Energy, an Australian company listed on the Australian Stock Exchange (ASX), whom Trowers & Hamlins acted for when it listed on AIM in December 2010. Instead of an admission document, the company was required to provide a range of information by way of an announcement 20 clear days prior to the date of its expected admission.

Information included:
• the size of its capital raising (which was approximately £4.9 million)

• confirmation of compliance with the legal and regulatory requirements of the ASX , the relevant AIM designated  market • details of the business of the company and its intended strategy following admission

• a description of significant changes in the financial or trading position of the company since the date to which the last audited accounts were prepared

• confirmation of no reason to believe that the company’s working capital would be insufficient for at least 12 months from the date of its admission to AIM (note that this is slightly less robust than the working capital statement required to be given by the directors of a non-quoted company following the standard admission route to AIM)

• the rights attaching to, and the arrangements for settling transactions in, the shares being admitted, and any other information that has not otherwise been made public that would otherwise be required of an AIM applicant

• the company provided a website address containing its latest published annual report and accounts for a period ended not more than nine months prior to admission to AIM.

In practice, although no admission document is required, some of the work that is needed for a standard AIM admission, in particular legal and financial due diligence, will still need to be carried out; for example, a working capital report will be prepared to support the working capital statement that is made.

The company’s nominated adviser, which is required to confirm to the London Stock Exchange that the company is suitable to be admitted to AIM, will consider the level of due diligence that it requires to be carried out. This will depend on how long the company has been listed on the particular AIM designated market (and which one) and the extent to which the business has changed since due diligence was last carried out.

Sectors listing on AIM
The natural resources sector is well represented among dual-listed companies, with 22 mining companies and ten oil and gas exploration and production companies. The popularity of the ASX and the Toronto Stock Exchange among resources companies is, in part, due to the location of the assets and their histories.

However, as our figures show, there are numerous other exchanges where AIM-listed companies also choose to list. In all, 31 different exchanges are represented by dual-listed companies, including exchanges as diverse as the Namibian Stock Exchange, the Lima Stock Exchange and Dhaka Stock Exchange.

As well as companies within the mining and oil and gas sectors, this listing model has begun to attract companies from a wide range of other sectors, including real estate, general finance, investments and media.  

AIM offers an attractive additional forum, principally due to the deep pool of institutional capital that is available to fund expansion and growth, both at the time of flotation and also on subsequent fundraisings. The London market also has significant understanding of certain sectors, most notably natural resources. A dual-listing can offer companies the opportunity to market to a broader range  of investors in different jurisdictions to broaden its shareholder base. For example, Canada is known for its retail investor base and London is known for its institutional investor base.

Conclusion
The AIM designated market route seems to have been a moderate success for those companies dual-listing, for whom it was available. However, the low overall number of dual-listed companies (73 out of 1,164) suggests that companies listed on overseas markets (including designated markets) may already have their key needs adequately met.

The ongoing cost, timing and regulatory implications of being listed in more than one jurisdiction cannot be overlooked; and they may well put off those companies that are aspiring to dual-list but which are lacking the overwhelming business rationale to take the plunge.

If a company decides to proceed, early preparation, liaison and communication between experienced advisers and the company are key to a successful dual-listing process.

Charles Wilson is a partner at Trowers & Hamlins LLP

Trowers & Hamlins is an international and City law firm with 128 partners and over 650 staff. The firm has an extensive track record for AIM and listed company work and, in particular, demonstrates continued strength in the natural resources sector and considerable experience of acting for overseas issuers. For further information, please contact Charles Wilson at cwilson@trowers.com