Institutes » Business Matters: Cross me off the list

Business Matters: Cross me off the list

A quick trade sale rather than a market listing appears to be the preferred way of making a capital gain

I recently did some research how many companies were on the London Stock Exchange’s Main Market and AIM in 2000, and in 2010. What I found was surprising.

In 2000, there were 2,405 companies on the Main Market. In 2010, that number had fallen dramatically to 1,423. When you look at AIM, the situation is reversed: there were 525 companies in 2000 and this had jumped to 1,195 in 2010.

Why is this? Is the UK regulated market suffering? Or is it testament to AIM’s success?

Notice that the increase in AIM has not replaced the full fall on the Main Market. Are primary markets still seen as an effective way to raise finance, to grow, and to create jobs?

Other market trends can also be teased out from the main indices. The FTSE All-Share is made up of enough companies on the Main Market to represent 98% of the total market capitalisation. That’s about 630 UK domiciled companies (out of the approximately 1,000) on the Main Market.

And did you know that the top 10 companies on the Main Market represent a whopping 40% of the FTSE All-Share? The FTSE 100 represent about 85% of the total market capitalisation of the Main Market. That means that all the other companies on the Main Market contribute just 15% of the market capitalisation.

So we have fewer, more global companies on the regulated Main Market. Smaller companies are on AIM, and there seems to be a general reluctance by all but the biggest companies to join or remain on the Main Market.

I guess my question is: is it still a corporate rite of passage to go public and raise finance? Or is a quick trade sale less hassle and the most convenient way to crystallise a capital gain?

Tim Ward is chief executive of the Quoted Companies Alliance (QCA), the membership organisation of the small and mid-cap quoted sector working in the UK and Europe. His past roles have included head of issuer services and head of marketing at the London Stock Exchange and finance director at FTSE, the index company.

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