On the PLUS side
Article Date: Oct 26 2006
PLUS is the recently overhauled share trading facility (formerly called OFEX) that seeks to connect young companies with equity finance at an earlier stage than established stock exchanges such as AIM and FTSE. It’s attracting interest from a variety of new sources as a route to riches now worthy of consideration.
Jean Dong, Chinese businesswoman and presenter on BBC Radio’s World Service, is just one of the latest entrepreneurs to take her company to the PLUS market. Dong’s Global Education Group, set up by Hong Kong psychiatrist-turned-entrepreneur Dr Johnny Hon in order to arrange UK work experience for Chinese students, has listed on PLUS after raising £350,000 privately at 50p a share with the help of St Helen’s Capital. Hon’s China-focused film and media concern Global Entertainment Group also adorns the PLUS list.
Lord Rotherwick of the canny Cayzer business clan has been mooting a
£1 million PLUS float for private jet supplier Air Touring. Also in the queue is Mark Smith, contemplating floating Quercus Publishing, producer of Universe and Speeches that Changed the World, after a private fundraising. And youthful financial scribbler Conrad Windham has been drumming up £450,000 for a PLUS debut for Pakistan-focused venture Oracle Coalfields, headed by Shahrukh Khan. He is also preparing Chile uranium play U3O8 Energy for a £500,000 PLUS float.
These are just some of the company chiefs who have decided to tap PLUS in the wake of a recent radical upheaval led by Simon Brickles, former head of the London Stock Exchange’s junior AIM market. Now chief executive of PLUS Markets Group, the company running the show, Brickles has widened the scope of PLUS’s operations and brought in City market makers to tackle its twin perennial problems: an inability to trade shares in large volumes and the wide gulfs between buying and selling prices.
Arid trading environment
This problem of illiquidity has dogged the market for years and is often
cited as a possible deterrent by investment professionals, who argue that otherwise PLUS offers a potentially valuable channel for young businesses seeking to lay the foundations for long-term growth.
PLUS currently provides a primary market for some 170 companies, together valued at nearly £2 billion, and has in its history raised a combined total of £1.3 billion, mostly in secondary fundraisings, for the companies that have passed through its doors.
Peter Jay of law firm Beachcroft, who advises Quercus and several PLUS- and AIM-quoted companies, says it can cost between £10,000 and £100,000 to list your company on PLUS, depending on whether you are raising money at the same time. He argues that this compares favourably with around £250,000 to £350,000 required to go to AIM.
PLUS offers Enterprise Investment Scheme tax reliefs to companies and investors. Jay suggests PLUS is an ideal market to raise between £250,000 and £1 million, and says it can suit companies to raise money privately and then move to PLUS quickly and cheaply. PLUS is also likely to host more shell companies, providing quoted vehicles into which budding entrepreneurs can insert their businesses. AIM shells with less than £3 million raised by the start of October have now been de-listed, which could send a few over to PLUS – if the market will accept them.
If you can raise money on PLUS, one advantage is that you could avoid putting yourself in the hands of venture capitalists. Their relatively short-term exit targets, demanding investment return requirements and itch to ‘micro-manage’ can make it hard to develop your business in the optimum way. Under Brickles, PLUS has beefed up its market discipline but it still imposes a less onerous and costly regulatory framework than AIM, which is increasingly becoming more like the full Stock Exchange in regulation and expense.
