More NewsWrite off OFEX at your peril

Write off OFEX at your peril

When OFEX owner Plus Markets Group announced that it was planning to establish ‘an extended range of securities’, it was immediately assumed that it was planning to challenge AIM.

Comparisons between the two were instant and market watchers swiftly
concluded that little OFEX, with its 138 companies, was punching way above its
weight.

On the surface this observation makes sense, but is it premature to write off
OFEX’s prospects?

In Simon Brickles, the Plus Markets Group has a chief executive whose
knowledge and experience of junior markets is unparalleled. Previously, Brickles
was the head of AIM, drafting its current rules and promoting its benefits
locally and abroad. He knows what is required to attract investors and
companies.

Brickles has also heard the sceptics discuss the drawbacks of light
regulation – and why institutions would never plough their pots of cash into AIM
companies as a result.

The same arguments are being made again regarding OFEX, but the fact that
Brickles has taken the job suggests that it holds hidden potential.

OFEX does, after all, have the infrastructure in place to support a
burgeoning primary, and, indeed, a secondary market for new securities.

One must also ask whether AIM will retain the relaxed regulation and tax
breaks that have made it such a success.

There are 1,318 companies listed on AIM with a combined value of £50bn, and
in Glisten, Neteller and Sportingbet it has businesses with market caps in
excess of £1bn.

As AIM grows, so the regulatory noose tightens. AIM groups are already
subject to the Combined Code.

How long it will be before authorities start looking at the number of large
AIM groups and question whether the inheritance and income tax reliefs the
market enjoys are still appropriate?

For corporate financiers, tied up in the daily heat of finding and closing
deals, focusing on anything but the next merger and acquisition is difficult.

A quiet look ahead, however, shows that OFEX might become the next lucrative
marketplace to operate in.

Nicholas Neveling edits the corporate finance page

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