In a nutshell the four main sources for capital to support Britain’s enterprising businesses are –
- Government – it hasn’t got any money
- Banks – they are holding on to their funds
- Business Angels – if judged on ‘Dragon’s Den’ they should be banned
- Equity markets – which means AIM and PLUS.
AIM has priced itself out of the SME market. This week I introduced a Chinese restaurant entrepreneur, who turns over £20 million per year, to an AIM broker. His quote, without any fund-raising, to introduce the company to AIM was £750,000.
PLUS Markets should be filling the equity gap. They are not and now PLUS only has around 150 companies. For the six months to 30 June 2011 PLUS Markets (whose shares are traded on AIM) lost £1.4 million on revenues of £1.46 million. Their trading platforms are a complete mystery to most of us.
PLUS is a Recognised Investment Exchange (“RIE”) which is a serious matter. It has two markets: the primary with one member (Mears Group) and PLUS Quoted which offers the same tax reliefs as AIM.
PLUS Markets should be doing well. Their problems include increased regulation although, to their credit, they have restored their relationships with the FSA.
The departure of Simon Brickles over a year ago (he was the man who built AIM) as chief executive was a body blow and has now resurfaced. The Middle East investor group Amara Dhari, which owns 17% of the stock, has given PLUS 31 days to organise a General Meeting. They want the resignation of the chairman Giles Vardey and his replacement by Simon Brickles.
Amara Dhari invested at 7.5p per share: the price is now 1.3p.
The resolution is likely to be defeated. Close Brothers have 19.6% of the shares and Bruce Rowan, a dedicated supporter of PLUS, has 12%. It is thought that both will vote with the Board.
In a way it doesn’t matter. The problem at PLUS is that the management simply have no idea what they are doing. Of course it is difficult at the moment but there is business out there. PLUS’s main gesture is to wave a rule book at everybody. The advisers are scared stiff of the regulatory environment.
The General Meeting is likely to achieve nothing.
Which is a pity because Britain’s SME’s need a supportive equity raising structure.