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Smaller companies are
potentially the investment stars of the future. Unlike FTSE-100 stocks,
which comprise the vast majority of the total UK stock market valuation, and
which will typically grow at a steady but unexciting rate, smaller companies
may be unexplored gold mines - at least that's the typical story told by
their promoters when they are first launched onto the markets.
They are clearly also
exceedingly risky, with volatile stock prices, low trading, often poor
liquidity and frequently bad corporate governance. However there are some
tax advantages in investing in AIM and Plus Markets (formerly OFEX) stocks - the former is the London
Stock Exchange market for smaller companies with simpler listing rules and
lower costs, while Plus Markets is run by a third party and has even
lower costs. The government is keen to promote a buoyant smaller company
sector as this is where most new employment arises, and a listing venue for
such companies is important to maintain a healthy venture capital market.
Smaller companies,
whether on AIM or the main market, that are seen as unexciting and ex-growth
can be ignored by analysts and hence be ignored by most of the market. The
result is often stagnant share prices, and dominance by a few major
shareholders. With lack of interest by institutions, there is often a desire
by such shareholders (who are often represented on the board) to take the
company private - sometimes at a price that is unwarranted and prejudicial
to private shareholders.
A submission by UKSA on
proposed changes to the AIM Listing Rules and the Rules for Nominated
Advisers (Nomads) in 2006 is contained in the following document:
Aim Listing Rules. A submission by UKSA on
the subject of smaller companies in 1998 is contained in the following document:
Smaller_Listed_Companies_1998. |
