IPO – Standard List Vs. AIM

We have recently advised on an IPO for one of our clients’ companies, and the question arose as to whether they should list on AIM or the Standard List.

The two listings namely AIM and the Standard List have distinct different reporting and operational requirements. Furthermore, the two markets also allow businesses to treat their shareholders in different ways.

The London Stock Exchange (LSE) operates two principal markets namely the Main Market (sometimes referred to as the Official List) and the AIM market. The Main Market is made up of two regimes, namely “Premium” and “Standard”. The Premium listing is typically used by larger companies who qualify in terms of having access to a more liquid market with an increased profile. Companies with a Premium listing can also be eligible for inclusion in the various FTSE indices. Unsurprisingly, companies who have a Premium listing must meet higher standards of regulation and corporate governance and the level of regulatory costs are also significantly higher.

For smaller companies, the decision remains as to whether to list on AIM or the Standard List. For a Standard Listing, companies only have to comply with the minimum legal requirements and of course the fees are also significantly lower. Similarly, AIM was set up as the LSE’s exchange for smaller and growing companies and it also has a simplified regulatory environment, which cater for the needs of such companies.

A summary of some of the differences between a Standard listing on the Main Market and a listing on the AIM market are as follows:-

• Market cap – companies with a Standard listing must have an expected market value of at least £700,000. There is no such requirement for companies listing on AIM.
• Float size – a company listing on the Standard market requires at least 25% of the company’s shares to be floated on the market.
• Track record – there is no requirement for a track record for companies listing on either AIM or the Standard market. However, for a company listing on AIM that has not been earning revenues for a minimum period, all investors holding at least 0.5% must be locked in for a minimum period of 12 months after IPO.
• Nomad – a company must have a nominated adviser to list on AIM whose role it will be to advise and guide on the company’s obligations under the AIM rules. A nomad is not required for companies who list on the Standard market.
• Prospectus  – a company listing on the Standard market is required to provide a prospectus which has to be approved by the UK Listing Authority. A listing on AIM does not require a prospectus but instead an Admission Document which must be prepared in accordance with the AIM rules. It is fair to say that the Admission Document contains similar information to that contained within a prospectus.
• Corporate Governance – there are no requirements for companies listing on either AIM or the Standard market to say that it has complied with the UK corporate governance code. However, a company listing on the Standard market must identify the corporate governance code that it is going to be subject to and this has to be disclosed as part of its annual report (directors report). Companies listed on AIM are required to comply with corporate governance guidelines for Smaller Quoted Companies.
• Reporting – Companies on the Standard market must file on an annual basis with the UK Listing Authority a document containing all the information that is required to be provided to the public over the previous 12 months. Whilst companies listed on AIM do not have to do this, they still need to ensure that such notifications are freely available on their website. In terms of financial reporting, a company on the Standard market requires to publish an annual report within four months of the end of each financial year whilst the time constraint for AIM listed businesses is six months. In addition, Standard listed companies must publish their half year results within two months of the end of each half year whilst AIM listed companies have a three-month deadline.
• Tax Relief – somewhat surprisingly, companies listed on the Standard market do not qualify for tax relief through the Enterprise Investment Scheme or Venture Capital Trust. AIM-listed companies do however qualify provided certain criteria are satisfied.

It is hoped that this article sets out some of the differences between the two listings. Each market has its relative advantages and disadvantages, including for companies on the Standard market the ability to move to the Premium market relatively easily, which is not necessarily the case for AIM-listed companies. However, shareholders in AIM-listed companies have more influence including the right to vote on substantial transactions including related party transactions, whereas this is not necessarily the case for a Standard-listed company.