Well known toy maker Hornby plc announced in June 2015 that it intended to step-down from the LSE's Main Market to its junior market, AIM. Stephenson Harwood acted for Numis, Hornby's Nomad and broker. The step-down to AIM was part of management's turn-around strategy which included various customer and supplier measures and a refinancing. Hornby also raised £15 million through a moderately discounted placing. This article focuses on the reasons for a move to AIM and the process for the move with a contemporaneous placing.
Why move to AIM?
AIM's advantages for smaller companies include simpler regulatory requirements and reduced on-going costs. Key to Hornby was the flexibility around equity fundraising. Hornby's strategy to deliver improved shareholder value includes cost cutting and potentially raising further equity. Hornby stated in its shareholder circular that it was unable to raise sufficient funds on the Main Market without publishing a prospectus, which it could not afford to do. On AIM, it was able to issue placing shares representing approximately 28 per cent. of its issued share capital without a prospectus. Under UK tax legislation there are other incentives for listing on AIM including the potential to raise money under the Enterprise Investment Scheme (which is not available for a Main Market listing), relief from inheritance tax for investors holding shares in certain types of AIM listed companies, the ability for venture capital trusts to invest in certain AIM listed companies, corporate venturing reliefs and the abolition in 2014 of stamp duty on transfer of shares listed on AIM.
The Process – De-listing
Moving to AIM from the Main Market is a two stage process involving de-listing and an admission. De-listing (technically cancellation from the listing on the Official List and from trading on the Main Market) requires the approval of 75 per cent. of the company's shareholders at general meeting. The company will need to call a general meeting on appropriate notice to pass this resolution and any other resolutions necessary including, if the company choses, a resolution approving the application for admission of its shares to AIM. At the time the notice of meeting is sent to shareholders with the accompanying circular, the company will still be subject to the Main Market Listing Rules. The circular will therefore need to be approved by the FCA and provision should be made for this in the timetable.
The Process – Admission
If, like Hornby, the company is undertaking a placing, it will be conditional on admission to AIM but at the time the placing commitments are entered into the company will still be subject to the Main Market Listing Rules. These rules include a prohibition on issuing shares at a discount of greater than 10 per cent. to the middle market price at the time of announcing the placing. Admission for fully listed companies takes place under the fast track procedure for "quoted applicants". These are applicants that have traded on a designated market, for at least 18 months prior to applying to AIM, including the Official List of the UKLA, NYSE, NASDAQ, Deutsche Börse and the Australian Securities Exchange amongst others. A quoted applicant, for example Hornby moving down from the Main Market, does not have to produce an admission document. It simply has to provide the information required by the AIM Rules at least 20 business days before admission.
Moving from the Main Market to AIM is a relatively well-worn path with fewer hurdles than for a new applicant – principally there being no need to produce a full admission document. The timetable is fairly lengthy given the need for a general meeting notice period and the 20 days between Schedule One announcement and admission, as well as the UKLA's time to approve the circular.