Here is the result of a study on London’s AIM. An eye opener on Chinese investment in Britain.
As per an accountancy firm specializing in London’s junior stock market, 14 companies have left London’s Alternative Investment Market (AIM) from January 1 to June 30 following the resignation of their “nominated adviser”, also known as NOMADs.
This figure, up from 3 in February 2011 is the highest ever recorded for the AIM. The report was prepared by UHY Hacker Young, an accountancy firm that audits more than 20 firms on the index.
NOMADs are typically responsible for ensuring that their clients follow the rules of the AIM market.
“AIM is facing a real crunch among NOMADs, with many brokers and investment banks reducing their exposure to riskier parts of the junior market,” said Laurence Sacker, managing partner at UHY Hacker Young.
He went on to add, “This is particularly affecting smaller or more complex AIM-listed businesses, or those based in emerging economies, as NOMADs are deciding that they are unable to take the responsibility the stock exchange requires.”
According to Sacker, advisers quit for a number of reasons, “the most likely reason is they have lost trust in the company’s management.”
AIM-listed companies will have to find a replacement adviser within a month or be delisted.
In the last two years, high profile delistings include Sable Mining SBLM.L, whose NOMAD Cantor Fitzgerald resigned in September after its CEO was indicted for corruption in Liberia.
Of note is the fact that the LSE hosted index has struggled to grow with the onslaught of large number of Chinese listings. As per a 2016 survey, two thirds of NOMADs faced communication issues with Asian companies.
A number of Chinese companies, including LED International and Asia Ceramics Holdings, were delisted after their NOMADs resigned.
In July, the LSE had launched a consultation on AIM, which pushed NOMADs to work harder to improve their due diligence report on companies they take on as clients.
Since its launch in 1995, the average AIM stock has fallen by 4.4 percentage points and have failed to return investor’s monies. In comparison, the FTSE 250 index has gained more than 400%, over the same period.