Canadian listings draw BMO to Britain

BMO Capital Markets joined a growing list of brokerages that are getting involved in underwriting Canadian companies listing on London’s Alternative Investment Market, a flexible sub-market within the London Stock Exchange.

BMO has hired a team of professionals based in London, England, to broaden the firm’s capabilities in serving smaller listed companies, especially in the mining sector, on AIM. Two other Canadian brokerages are already established in the market, Canaccord Adams and RBC.

The bandwagon may only be getting started as North America’s increasingly strict regulatory environment has proven too much for some Canadian start-ups, fuelling a trend toward listing on overseas stock markets. Overwhelmingly, the market of choice has been AIM.

A February report from PricewaterhouseCoopers said that 2006 saw a new record for Canadian companies listing on AIM, as 13 new issues raised $425 million Cdn. That tops the previous record set in 2004, when 12 new listings raised $198 million Cdn.

According to PwC, there were a total of 462 new admissions to AIM in 2006, raising the total number of companies to 1,634 by year’s end. At the end of January, of the 304 internationally listed companies, 43 were Canadian, representing the second-highest total of foreign companies listed on AIM, at 14.1%.

“AIM has really caught the attention of Canadian companies in the last five years as the range of institutional investors has grown with all of the main U.K. institutions currently invested in AIM, including a number of leading European and U.S. institutions,” said Ari Sahakian, director of PwC’s transaction advisory group.

Increased regulation, such as America’s Sarbanes-Oxley Act, in the major North American markets can be a heavy financial burden for small companies looking to raise their first substantial amount of investor capital.

Foreign companies that list on AIM are not required to incorporate in England, and can drastically reduce their compliance costs and gain access to an investment pool dominated by institutional investors.

LSE spokesman Richard Webster Smith says international listings on AIM are particularly attracted to the pool of institutional investors. Compared to a market like the Nasdaq, where, he estimates, only about 30% of the investors are institutional, AIM has a base of about 58% institutional investors.

“Institutional investors are potentially a more stable shareholder base and it’s much easier to raise large amounts of funds quicker from these investors,” Smith says.

One of the key sectors of Canadian business that is looking to draw on these large pools of cash is the mining industry, which makes up the majority of Canadian AIM listings. But Sahakian points out that last year saw an increase in Canadian tech companies listing on the exchange.

“Seven of the 13 Canadian companies that listed on AIM in 2006 were non-mining companies, indicating the broader appeal of AIM in the Canadian marketplace.”

The LSE’s Smith adds that specifically within the tech sector there has been interest by Canadian fuel-cell and power technologies to list, as well as a growing number of bio-tech companies.

BMO said its expanding London-based team’s experience in the mining sector will make it a strong contender when it enters the market, but the bank hopes to become a preferred player with some of these other growth sectors as well.

“As a recognized leader in mining industry research, sales and trading, we are well positioned to give investors direct exposure to companies in every sector,” said Jacques Vaillancourt, managing director and head of European operations, BMO Capital Markets.

Filed by Mark Noble, Advisor.ca, mark.noble@advisor.rogers.com

(03/07/07)

Mark Noble