OFEX marshals forces to rival AIM

OFEX, the less-regulated trading market for smaller companies, has a long way
to go before it can successfully challenge AIM, corporate finance experts have
said.

Plus Markets Group, the owner of OFEX, revealed last week that it had raised
£2.5m from a share placing, which it aimed to use to establish ‘an extended
range of securities’ that would broaden its existing trading services.

The move suggests that OFEX is positioning itself to win business from the
highly successful AIM market, owned by the London Stock Exchange.

A spokeswoman for OFEX said the fact that Plus Markets Group had secured
£2.5m of investment from institutions showed that it was ready to expand and
secure more business.

‘We have turned a corner after some tough times. We are ready to offer new
products which shows that we are growing,’ the spokeswoman said.

Corporate finance experts, however, were tentative on the prospects of OFEX
providing a trading platform that would be strong enough to rival AIM.‘OFEX has
stemmed the flow of attrition of lost listings and has done extremely well to
cut costs, but it has a real distance to go to take on AIM,’ said Grant Thornton
corporate finance partner Philip Secrett.

The major challenge facing OFEX is how it plans to position itself. To build
investor confidence it will need to balance providing a flexible market that
still has enough regulation in place to maintain investor confidence.

Jeff Harris, corporate finance partner at PKF, said this factor would make it
tough for OFEX to secure the crucial institutional investment required for it to
thrive.

‘OFEX may be an alternative at the lower end of the market, but investors
will have to accept that due diligence will be lower and risk higher.’

Secrett said the impressive performance of AIM could act in OFEX’s favour.
‘AIM has grown so impressively that there are listings raising £5m every week. A
company looking to raise £1m may see itself as too small for AIM, and OFEX could
move into that space,’ he said.

Harris, however, maintained that even companies aiming for a listing
in the £1m range would still prefer AIM to OFEX.

‘We have worked with a number of clients raising £1m to £1.5m who have listed
on AIM,’ Harris said. ‘The fees of between £200,000 and £300,000 are a
significant proportion of the proceeds, but at least companies know that they
have invested in something.’