Few Plusses As UK Exchange Space Shrinks
Falling volumes and extra competition in the exchange space have been mooted as reasons for the winding down of Plus Markets, London’s stock market for small and fledgling companies.
After launching itself in 2006 as a challenger to the London Stock Exchange-owned Alternative Investment Market (AIM), Plus Markets has posted losses for six consecutive years and was forced to put itself up for sale in February this year but the exchange group has failed to attract any acceptable offers and will instead begin to be wound down over the next six months.
“The exchange environment these days is getting more and more competitive,” Sophie Murra, a manager at Sharemark, a rival UK stock market for smaller companies, told Markets Media.
“I am sure that lower volumes on all exchanges is also part of the problem and in terms of capital raising on the markets recently there has been very little fundraising activity and that is bound to have an effect.”
Plus, which listed some 156 companies at the beginning of last month, including Arsenal football club and brewers Shepherd Neame, has seen listings dwindle over the last few years. And upcoming UK regulatory requirements from the Financial Services Authority, which will force institutions to hold more liquid assets to safeguard against market stress, added to Plus’s problems. The LSE-backed AIM, by comparison, has over 1,250 companies listed.
“Due to the ongoing operating costs of its business in the context of its regulatory status, the company’s cash balance has reached a level at which the board has informed the FSA that it intends to commence a process of orderly closure,” Plus Markets said in a statement on May 14. In the six months to June 30, 2011, turnover was just £1.46 million, and losses in the same period were £1.4 million.
Plus also says it will ensure that companies traded on the Plus-quoted market are able to find suitable alternative arrangements for the trading of their shares.
“Plus quoted companies have got to decide between their options to ensure their shareholders have an ongoing trading facility,” said Murra at Sharemark. “That’s a key problem—if they no longer have a market solution then effectively those existing shareholders have no way to trade their shares.
“Plus quoted companies need to make a decision as to which alternative market would be most suited to their company. Sharemark is obviously one of those potential solutions.”
From today, Sharemark is offering free admission on to its exchange for Plus-quoted companies until January next year.
“Sharemark, like Plus Markets, provides a solution for smaller companies requiring access to capital and for companies whose shares are less liquid than those of larger, AIM-traded stocks,” added Murra.
“Sharemark has been around since 2000 and we have been firmly established but there have been another couple of players that have entered the market recently and, yes, competition is out there and stock markets are companies as well and compete in ways that ordinary businesses do.”
Chris Searle, corporate finance partner at accountants BDO in London, told Markets Media: ““It’s a shame that Plus is closing. There’s a need for a third tier public equity market in the UK below Aim and the main market.
“The problem with Plus is that it wanted to be both a cheap and cheerful market for smaller companies but then, in recent years, it loaded up its rule book so that the rules were more or less a mirror of the Aim rules. Its other big problem was that it couldn’t attract institutional investors which meant that fund raising was largely dependent on private investors.
“The demise of Plus is going to make it even more difficult for smaller companies to raise capital at a time when bank lending is tight. And existing companies on Plus are likely to face a dilemma: do they go to Aim, and not all will be able to, do they delist completely, or do they go to one of the matched bargain markets like Sharemark? All in all, it’s a sad day for the public equity markets in the UK.”
CEDX opened on 6 September, offering contracts on Cboe Europe single country and pan-European indices.
The MOU covers certain security-based swap dealers and participants.
Equity underwriting on European exchanges rose 70% in the first half.
The analysis is based on transactions publicly reported by 30 European APAs and venues.
A similar service is available on the BIDS platform in the US equity market.