Corporate Finance - David Clift.

From a modest start in 1995, the facility has grown such that there have now been over 600 share issues, raising over £900m in new capital, for over 200 companies. There is even talk of a flotation next year.

Ofex appeals to companies looking for early stage capital or a market value for their shares without the expense and regulation of the Alternative Investment Market.

Comparisons between Ofex and AIM are frequently made. The main differences are:

– AIM is a market for quoted shares. In contrast, Ofex is a facility (‘off exchange’) for unquoted shares. AIM is therefore more liquid, while Ofex share prices are more volatile.

– Regulation is tighter on AIM, which is regulated directly by the London Stock Exchange. Ofex is regulated by JP Jenkins Ltd, which is itself regulated by the London Stock Exchange.

– The Ofex application process is less onerous than AIM and cheaper.

Investors in Ofex stocks frequently invest in companies that have only recently started trading so their potential for growth is maximised.

One good example of this is Red Squared, which raised #2.2m in December.

Such was the interest in the company that the offer was five times oversubscribed.

But what about the future? The recent gloomy market sentiment has certainly dampened the level of activity on both AIM and Ofex.

History has shown that stock markets are by their nature cyclical which suggests confidence will return. That said, activity in 1999/00 was fuelled by investors’ appetite for technology stocks and it may take a while for activity to return to these heady levels.

An important point to make, however, is that rather than acting as competitors, both Ofex and AIM have been complementary to one another. Ofex has provided a valuable source of equity funds for many companies, new and established alike, for whom AIM was not an option.

Ofex has also acted as a platform for companies to progress to AIM, a recent example being Sportingbet.com. No doubt there will be many more to follow.

CLB’s website is at www.clb.co.uk

For more on stock exchange sites, see web reviews, page 15.