Nomad shortage causing AIM exodus
A shortage of Nominated Advisers (Nomads) is causing an exodus of companies from the Alternative Investment Market (AIM), with 151 companies leaving AIM in the last year, according to UHY Hacker Young
25 Jun 2018
UHY Hacker Young claims that a lack of Nomads has forced 151 companies, including 15 in the last year, to leave AIM, resulting in a ‘huge loss in investor value’.
AIM requires that a company has a Nomad to ensure it complies the market’s rules and allows only 30 days for a replacement to be found before delisting.
The firm blames a shortage of new IPOs, tighter regulation and poor corporate governance for the decline in advisers.
‘Profit margins for Nomads have shrunk as the number of AIM IPOs have remained low. The tighter regulatory framework put in place by the London Stock Exchange has also added to the costs of Nomads. This has been intensified by Mifid II regulations, which have added extra complications and costs for Nomads that are part of broader stockbroking groups,’ says UHY Hacker Young.
‘The client is unwilling to accept guidance from the Nomad on the company’s responsibilities to AIM or breaches the AIM Rules for Companies. The reputational risk for the Nomad of continuing to act for that business is too great e.g. if the AIM listed company has poor corporate governance.’
The London Stock Exchange, which regulates AIM, requires that a Nomad is a firm or company, not an individual, that has practised corporate finance for at least the last two years and has acted on at least three relevant transactions during that two-year period. They also need to employ at least four executives with relevant experience and qualifications as defined by their rules.
Laurence Sacker, managing partner at UHY Hacker Young, suggests that the AIM rules, while boosting investor confidence, may need to be reviewed to counter the lack of Nomads.
‘Nomads fulfil a vital role in the AIM market and without a healthy roster of Nomads the job of raising funds for small growth companies on the stock market would be much harder,’ he said.
‘The London Stock Exchange is right to hold market participants to the highest of standards. However, perhaps, it needs to look again at its requirements and regulatory processes for Nomads to see if more advisory firms can be attracted to the market.’
Report by Rob Munro