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OCZ, a Silicon Valley memory technology company, prides itself on its firsts.
“We’ve a history of innovation – we’ve just come out with the fastest memory on the planet,” says Arthur Knapp, chief financial officer.
But the OCZ first that is stirring the most interest in the Valley is its debut on London’s Alternative Investment Market (Aim) in the summer – a move many others are now considering and seeking advice on.
“I’ve taken part in three seminars so far and there’s a lot of sincere interest. I think people are still learning about it in the US. I hadn’t heard about it till a year ago,” says Mr Knapp.
He remembers London Stock Exchange officials presenting the advantages of Aim over the Nasdaq to packed rooms of venture capitalists and technology companies last year.
Aim was launched in 1995 for smaller companies from any jurisdiction. It now lists 1,600, with a total market capitalisation of about £75bn ($140bn).
There is a light hand of regulation compared with the strict compliance in the US since the passing of the Sarbanes-Oxley Act in 2002.
With Aim, a nominated adviser or “nomad”, usually an investment bank, has an ongoing compliance and corporate governance role after it has guided the company through the flotation.
While the average market capitalisation of Nasdaq companies is $1.1bn, the average on Aim is $65m. Annual costs of listing on Nasdaq are about $2.3m including auditing and compliance fees, compared with only about $900,000 on Aim.
“In the US, there is a financing gap between venture capital fundraising that can only support a certain amount of capital being raised and the next step, being Nasdaq, that has a very high threshold,” says Gary Benton, a technology lawyer based in the Palo Alto office of Pillsbury Winthrop Shaw Pittman.
“So a whole series of companies are in a lost range. I’m trying to push as many as I can over to London, it’s a great opportunity.”
US investment banks, some of whom act as nomads in London, are also looking to bring companies to Aim and are targeting larger market capitalisations than the existing average.
“To date, it’s been fairly small-cap companies, but we think the minimum threshold now is around $100m,” says Colin McKay, a vice president for Piper Jaffray in Palo Alto.
“Smaller than that and it’s harder to attract the institutional interest and the liquidity in your stock.”
Any Silicon Valley flotations on Aim are likely to take place in the first half of next year, when market conditions may have improved.
“The market is open to good quality companies, but at the moment its appetite for risk is a little bit lower than it has been,” said one analyst covering Aim, who asked not to be identified.
“There have been some disappointments with overseas companies,” says Carl Franklin, a former analyst now with College Hill, the financial PR firm that helped OCZ to float.
“Investors are now looking for a well defined path to profitability and a good management team.”
OCZ’s experience has been positive enough for it to consider a secondary offering on Aim.
“We are very pleased, our advisers were first rate, it’s difficult to get analyst coverage in the US, but it feels like we get more interest in us here – we are still a bit of a novelty,” says Mr Knapp.
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