Associate

Editor's note: This story is part one of a two-part series that will conclude Monday.

The London Stock Exchange tweaked the admission procedures required for its AIM market, making it easier, quicker and potentially cheaper for foreign publicly listed companies to obtain a secondary listing in the UK.

AIM is the Alternative Investment Market in London. It's the London Stock Exchange's market for smaller, growing companies - words that describe most of today's biotechnology firms. The London Stock Exchange (LSE) is saying the move is meant to encourage U.S. companies - particularly those involved in technology, life sciences, gaming and natural resources - to add a secondary listing through London's markets.

What LSE has done is allow for certain publicly listed companies - NYSE- and Nasdaq-listed companies included - to use their most recent reports or SEC filings as a basis for achieving a secondary listing on AIM. For Nasdaq- or NYSE-listed companies, those documents could be the latest quarterly earnings or annual report, meaning the new "fast-track" regulations cut out the timely construction of an entire prospectus.

"The basic point is, in response to demand, we've made it easier for companies on designated markets to get onto the London Stock Exchange," said Graham Dallas, head of business development for the Americas at the LSE. "AIM was started about eight years ago; this move is designed to make it easier for international companies that have been through a strict due diligence process" to gain access to London investors.

There are nine accepted markets for the fast-track rule change. Besides Nasdaq and NYSE, companies listed on the Australian Stock Exchange, Euronext, Deutsche Börse (Germany), JSE Securities (South Africa), Stockholmbörsen (Sweden), Swiss Exchange and the Toronto Stock Exchange could use the new rule. In order to qualify, a company must have been listed for at least 18 months.

AIM is unique in its regulation process. There are about 700 companies listed on AIM now, each with what is called a nominated adviser, or "nomad." There are 69 firms that provide nomads, and the presence of one is required for any company listed on AIM.

"A company has to retain the services of a nominated adviser at all times," Dallas told BioWorld Today. "The adviser short-circuits the loop between a company receiving financial advice and having its actions regulated."

Any company seeking to list on AIM needs to be taken on by an adviser. That adviser then is the company's mentor, more or less, through the submission process and continues in that role going forward to ensure adherence to LSE regulations. And while there are potential conflicts of interest in that situation, said Ian Campbell, press officer, London Stock Exchange, it really isn't a problem.

"[The advisers] put their neck on the line when they bring a company to AIM," he said, so it is always in their best interest for that company to perform well. It's their reputation at stake. And while the LSE regulates the adviser, and would "come down on" either the company or adviser for any infractions, Campbell said "to date that really hasn't happened."

The rule change also is meant to cut the costs associated with gaining a listing on LSE. The LSE charges a fee based on a company's market cap - the amount can range from a minimum of £5,000 (US$8,260) up to £50,000. For example, a company with a market capital of £10 million would pay a fee of £7,500 to LSE. A company with a £250 million market cap would pay a fee of £42,500.

The adviser's fee is more substantial. In the case of a company raising public funds on AIM, the adviser would typically get 8 percent or 8.5 percent on an offering of £10 million, said a nominated adviser who preferred not to be named. That percentage is higher for lower offerings and decreases as the offering amount is raised.

But since the fast-track rule change is meant to usher publicly traded companies into London's institutional investor pool and not for public offerings, getting a handle on nomad fees is tricky. Although the change is expected to decrease the amount of fees paid to nomads by as much as half, as one adviser told BioWorld Today, estimating what a secondary listing could cost under the new rule is difficult because "it hasn't been done yet."

For a young biotechnology company in today's environment - one with its stock languishing in the shallow end of the Nasdaq pool - quick AIM listing doesn't mean a bounty of public funds. It means the chance to get recognition in London and potentially raise money through institutional investors.

Calling AIM "the survivor of all the European growth markets," Dallas noted that AIM boasted 60 initial public offerings last year. There were 97 IPOs in London overall in 2002, "more than the rest of Europe put together," he said. And while companies seeking a secondary listing on AIM would not be having initial public offerings, those 60 IPOs show that the AIM investor is hungry for new technology.

"There is an appetite here," Dallas said. "A good story will find a willing audience - an audience ready to look at a company on its merits and make investment decisions."

AIM does not have a minimum (or maximum) market capital requirement - a problem currently plaguing some Nasdaq-listed companies. Although Dallas said the rule change "is not just for biotech companies," he said London "is particularly strong in that area" and an AIM listing opens financial doors.

"[Companies listing on AIM] have access to a different pool of capital," he said. "There are more international funds in London than anywhere else in Europe. It's an institutional market more so than in the U.S.

"And the more international we make it, the better it looks on us and AIM."