AIM companies: why two stockbrokers can be better than one

It’s not unusual, in fact it’s commonplace, for larger quoted companies ­
especially FTSE-100 stocks ­ to have more than one stockbroker.

But for companies on the AIM market it’s still relatively unusual. To my best
knowledge, around 5% of the 1,700-odd companies trading on AIM have joint
brokers whereas we estimate 10% to 15% commission sponsored equity research.

The reason for not using joint brokers is ­ dare I admit it ­ a relatively
expensive recurring cost for smaller quoted companies, especially for companies
where cash is tight and have yet to turn a profit.

Of course, it should be acknowledged that not every AIM company warrants a
joint broker.

When factoring in the mandatory costs associated with the role of the
nominated adviser that AIM companies have to retain as part of their obligation
to join and remain on this market, a joint broker is more expense still.
So why on earth would directors of an AIM stock deliberately incur the expense
of taking on a second broker?

The reasons would have to be fairly compelling. Fortunately, in many cases
they actually are.
If you are chief executive, finance director or chairman of an AIM company, or a
trusted adviser to one, let me run through the upside of taking on a second

First and foremost, two stock-brokers should be able to give their mutual
client genuine synergies. By this, I mean the benefits should demonstrably
outweigh the cost in terms of placing power, advice and analyst research.

Another benefit of a joint broker is that it also adds complementary
distribution and contacts. This means that there are more potential investors to
be introduced to the client company.

But bear in mind that it would be counterproductive to take on a second
broker whose databases
show pretty much the same names in terms of relationships with fund managers and
high net worth individuals.

I realise I’m in danger of tooting my profession’s own horn, but I believe
that in most instances,
institutional investors take greater notice of research from a stockbroker than
from an independent equity analyst firm.

In current equity markets, fund managers will be scouting for shares that
appear undervalued and can offer strong upside potential.

If what it takes is a joint broker arrangement to help get a stock the
attention it deserves, then this is certainly something AIM companies should be

Peter Shea is group chief executive of Daniel Stewart

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