For raising over £500,000, a listing may be your best option. It is often the next step after angel and VC funding – but it can be a complex process. Initial public offerings (IPOs) involve floating your company either on the Alternative Investment Market (AIM) or on OFEX. There is typically more new capital on offer than from other sources of finance.
They may be worth considering if your business:
- Has an aggressive growth strategy
- Has a strong record of profitability
- Is in an attractive sector
- Wants to raise its profile
- Needs from £500,000 to £10m or more
What are AIM and OFEX?
AIM, the London Stock Exchange’s (LSE) market for smaller companies, is often a first step to joining the main list. For more details on the listing process required for AIM, visit www.londonstockexchange.com/AIM.
The OFEX market is regulated by the Financial Services Authority (FSA). It is often used as a stepping stone to AIM. For more details on the listing process required for OFEX, visit www.ofex.com Both AIM and OFEX are generalist and do not have sector preference. There are drawbacks, though. An IPO is the most time-consuming and expensive way to raise finance, and as a form of equity finance it means you have to give up some control of your business, consider shareholders’ interests and provide twice yearly updates on your company’s progress. There is also no guarantee how well subscribed the offer will be; if it is priced too high, it could reduce the sum raised.
In brief – Floatation
- OFEX is good for raising £500,000 to £5m. AIM is good if you seek £1m to £10m. Strong growth potential is necessary, and a track record of profit is usually helpful
- Fees account for over 10 per cent of funds raised on OFEX and AIM, more for smaller IPOs
- Flotation takes up to six months; you must be prepared to relinquish control and be strictly regulated