Whatever became of the AIM?

Sitting in a session at the OTVS conference in Ottawa last week, it dawned on me: no one is discussing the famed AIM market (see prior coverage “Bizarro AIMo part 5“, June 14-07). It really wasn’t that long ago that all anyone in tech land heard about – at least in terms of the public markets – was the FTSE’s AIM. Better valuations, access to European institutional investors, etc. The problems with going the AIM route were quite clear for Canadian investors:

– it didn’t qualify as an Accredited Exchange
– tax hurdles made VC share sales via the IPO essentially impossible
– IPO costs doubled with the addition of U.K. legal counsel
– the regulatory environment was far looser than Canadians had become familiar with: research analysts publishing research notes prior to the IPO, and using the document to market the story; investment bankers acting as the regulator post-IPO
– most AIM-listed firms didn’t see their shares trade from one day to the next

Ottawa, by far, experienced the heaviest AIM sell-job. So it was telling that the word “AIM” didn’t cross the lips of 260 people over a 3 day meeting.

With the news of Redline’s Canadian IPO, we are reminded once again that the AIM didn’t really serve any purpose for most firms, other than creating the opportunity to get a quote. A listing for the company’s shares, but not a market.

Redline went public only on the AIM in December 2006. Trading has been very sparse, and the AIM IPO didn’t drum up the European investors they had been promised as more than half of the book was subscribed for by Canadian funds. Redline is doing the right thing by listing on the TSX. You can expect RedKnee (RKN:AIM) to be next.

I can only assume that the AIM/TSX dual-listing craze is headed for the dustbin. Dragonwave (DWI:TSX) went that route when they went public earlier this year, but likely wonders why now. If a Canadian IPO is plausible, why would the board want to waste $1 million in incremental IPO costs if the shares will never trade on the AIM in any event?

Back when small cap Canadian firms sucked it up and blew their audit budget to dual-list on the NASDAQ (and that was before Sarbanes Oxley), at least there was a valid rationale: some U.S. institutions wanted to trade stocks on a U.S. exchange. Today, 40% of any Canadian brokerage firm’s trading revenue comes from U.S. investors trading Canadian-listed stocks.

Best of luck to Redline. It is a good story and should attract broad interest here. And with the Dow back at 14,000 and the NASDAQ at a one year high, the backdrop looks remarkably stable.

MRM