An interesting article in Monday’s Times of London states the obvious, at least to us intermittent cynics. There is an excess of crappy companies among the crew that have raced overseas to AIM and avoidance of Sarbanes-Oxley. Specifically:
Nearly two thirds of companies based in the United States that have
listed on the Alternative Investment Market over the past five years
have lost money for investors, an analysis by The Times has found.
Only 17 out of the 46 companies from across the Atlantic that raised
capital on Londonâ€™s junior stock market between 2001 and July this year
are currently trading above their issue price.
allowing for the slide in the US dollar, the performance is egregious
in light of solid gains for home-grown small-cap companies over the
Now, I’m not sure what “solid gains” means here, so it’s hard to know how well comparable U.K.-listed companies did in the period (and no, I’m not checking tonight). I’m particularly fond, however, of a quote later on in the piece, with someone almost, kinda, sorta calling for a little, you know, regulation:
“You have to treat a lot of these companies with the utmost suspicion,”
Giles Hargreave, who runs the Marlborough Special Situations Fund,
said. “You have to question whether [a IPO-ing company's advisor] can do sufficient due
diligence on a company in another continent.”
London-based investors can buy stocks around the world, but brokerages can’t do proper diligence on a new issuance any further away than Watford? Hmmm.