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Dozens of Silicon Valley companies are lining up to float on Aim, London’s junior market, as US businesses weigh up ways to raise funds at home amid the high cost of going public under the Sarbanes-Oxley Act.
More than 100 technology companies have been considering listing on Aim, say industry insiders. London Stock Exchange officials have made at least six visits to the Bay area in the past year to hold seminars and raise awareness.
Gary Benton, a technology lawyer for 22 years in the area and a partner in the Palo Alto offices of Pillsbury Winthrop Shaw Pittman, said the level of interest in the London market was unprecedented.
“Even though Aim has been around for 12 years, no one paid attention to it until six months ago. Since then there’s been a pretty steep curve of interest.”
His law firm has held three seminars in the past week for chief executives, chief financial officers and venture capitalists, some of whom had already interviewed “nomads” – the nominated advisers in London who guide flotations. Mr Benton said his firm was working on several listings and that interest had increased in the past month.
“We get a phone call from an interested company almost every day at the moment.”
Investment bankers are also seeing a flood of inquiries. “The volume has gone up dramatically in the last six months,” said Colin McKay, a vice-president at Piper Jaffray in Palo Alto, also a nominated adviser in London.
Venture capitalists have also become frustrated with the high costs facing the Nasdaq aspirants they have backed, because of the public company compliance requirements of the Sarbanes-Oxley Act.
Tim Draper of leading VC firm Draper Fisher Jurvetson has been particularly outspoken. The five-to-seven-years process from start-up to IPO was now 10 to 12 years, he said recently.
“A lot of the entrepreneurs I’ve talked to who have very successful companies…are going to take them public on the London exchange or the Singapore exchange or the Hong Kong exchange,” he said.
OCZ, a Sunnyvale company specialising in memory technologies, has been the first Valley company of this new wave to take the plunge. It listed on Aim in June, raising GBP5m at 65p a share. The shares peaked at 98p last month.
“Overall AIM has been a very positive experience for us,” says Arthur Knapp, OCZ’s chief financial officer.
“Sox is a big impediment for companies of our size, with bills of $2m to $4m to raise the money and then get a first-year sign-off [of accounts by auditors].”