PwC survey of AIM market finds 56% back the idea of companies intending to float setting aside a minimum percentage of shares which can be bought by the public. However, 37% are against the idea.
Whilst current AIM rules do not require a minimum free float, an upcoming PwC survey of the AIM community has found that 56% of respondents backed the idea of making companies intending to float on the exchange set aside a minimum percentage of shares which can be bought by the public.
Despite a majority of those polled in PwC’s AIM survey being in favour of a minimum float, 37 % were against it. Those not in favour cited retaining control as a key reason for restricting a free float.
Of the respondents in favour of a free float, 56% called for a minimum of between 26% and 50%, while only 15% believed a free float of less than 25% was appropriate. One fund manager commented that they “rarely invested in anything that didn't have a free float of above 50% and wouldn't invest if there was a majority holder of over 50%.”
Institutional investors usually snap up large tranches of shares, but after the UK FTSE Group announced plans to hold a market consultation into raising the minimum free float from 15%-25%, there has been much speculation about how far the overhaul should go- or whether it should happen at all.
David Snell, AIM partner, PwC said:
“This is not just a large company issue but a mid cap/SME issue as well. The companies which form the bedrock of the British economy often consider AIM as an attractive destination for raising capital. Whilst it is understandable that the owner/ manager wants to retain control post flotation, our survey shows that this is an increasing concern for some investors."
However, some respondents questioned the need for a minimum free float, arguing that liquidity and share price were a function of the quality and size of the company rather than the free float. One director from a smaller AIM company commented that they were forced to approach private brokers, with institutional support skewed towards larger companies where they see significant growth opportunities.
David Snell, AIM partner PwC added:
“With the opportunities for IPO's on AIM presently limited, now is the time to re-appraise whether the existing rule of no minimum free float remains the best approach. We must ensure that those looking to invest are given every encouragement to do so, driving further investment in growth companies and supporting a recovery in the wider economy.”
The full AIM survey will be available at the end of the month.
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