In the most recent issue of Backbone Magazine there is an article concerning the Alternative Investment Market (AIM). I must confess that I have not heard of it (before now) but it seems that at least some start up Canadian companies have.
What is it?
The AIM is, for lack of a better description, the European equivalent of the NASDAQ. It is a mechanism by which technology companies can access capital in the European market.
As recently as the first quarter of 2006 two private Canadian software companies (Excapsa Software Inc. and Sandvine Corporation) went public by listing their common shares in London on the AIM. Neither of them have sought a stock listing in Canada. Both of their IPO’s were vastly oversubscribed.
There are some tax complications, which arise as a result of listing on the AIM, which can be resolved in a variety of ways the most common of which is to have the company become a mutual fund corporation (MFC). The requirements for becoming a mutual fund corporation include:
1. that the company must be a holding company - some sort of reorganization may be required,
2. 95% of the company's shares (by value) must be redeemable by shareholders on demand,
3. it will be necessary to ensure that more than 50% of the MFC’s shares are held by Canadian residents at all times.
This may sound daunting and unattractive but, for European investors, the MFC structure is not a hard sell according to Robert Brant of Lexpert Magazine.
If you are in the position to do so, it may be worthwhile to take a look at listing on the AIM as opposed to some of the more traditional stock exchanges (the TSX, the NYSE, the TSXV or the NASDAQ).
Also of importance in any decision as to what exchange to list on is the Sarbanes-Oxley Act in the USA. Ponder this statistic - of the top 25 global IPO's in 2005, only 1 took place in the USA (Businessweek magazine - May 22, 2006). In 2000, 9 of the top 10 took place in the USA.
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