In the UK, the small company may be quoted on the main market of the London Stock Exchange or, if unlisted, on the Alternative Investment Market (AIM). If it is a foreign company, it may be simultaneously traded on an exchange abroad. The very small company may be PLUS-quoted, which means on the previous Ofex primary market. Let us take a more detailed look.

Main Market
There are some penny stocks traded on the London Stock Exchange Main Market. For a listing, a company normally needs a three-year track record, and 25 per cent of its shares in public hands. If it is to acquire less than 100 per cent of a target company, it must obtain shareholder approval. These rules do not apply on the AIM market (see below).

Alternative Investment Market
The Alternative Investment Market (AIM) is setting standards as a small companies market for the rest of Europe. As at March 2006, there were 1,188 domestic companies on the AIM and 220 international companies. To be quoted on the AIM avoids the higher costs and more onerous regulation of a Main Market listing. An AIM company is advised and supervised by a firm known as Nominated adviser, or Nomad, which is regulated by the London Stock Exchange.

The AIM is not a regulated market which, controversially, means that Real Estate Investment Funds, a property investment vehicle, will not be able to be quoted on it when they are introduced to the UK in early 2007.

It is a sign of strength of the market that it has substantial institutional investment. Foreign companies are increasingly quoted on the market, often by way of dual listing, which can bring risks to investors. In mid-2006, the pipeline of future market listings on the AIM was strong, although some companies had cancelled their debuts amidst stock market turbulence.
PLUS-quoted
PLUS Markets Group, an independent UK provider of equity market services, owns and operates the Ofex market for small growth companies and the PLUS trading service for shares of growth companies. By the time this book is in your hands, Ofex and the PLUS service will have merged into a single identity to be known simply as PLUS. Securities on Ofex will be called PLUS-quoted. They are traded on the PLUS trading platform alongside securities listed and traded on other exchanges, which are known as PLUS-traded.
PLUS-quoted stocks have an average market capitalization of £10–20 million, and companies look to raise up to £5 million from institutional and retail investors on the primary market, and more through secondary fundraisings. Some have raised no new cash but their shares are traded, perhaps to obtain a valuation for acquisition purposes, or to value employee share options. This introduction method of joining a market can enable a growing company to gain a period of experience and transparency on a public market before embarking on future capital-raising initiatives.

For investors, PLUS-quoted stocks are largely immune from the trends affecting mainstream markets. A PLUS quotation can serve as a springboard for a move to other, more senior markets. Experience of the old Ofex regime shows that you can do well if you invest in such future stars early, but many of the companies will not make a hoped-for leap. Even if they do, not every such company will necessarily sustain the higher listing. Some find it hard to adjust to the resulting sudden increase in their shareholder base and greater liquidity, with share price fluctuations arising.

For more details, visit the PLUS Markets Group website (www. plusmarketsgroup.com). Also see the site of unquoted.co.uk (www.unquoted. co.uk) for access to, among other things, useful bulletin boards.

Markets abroad
By June 2006, when the AIM had reached its 11th anniversary, some rival small company markets were operating in continental Europe.

In May 2005, Euronext, the cross-border exchange, launched its junior market, Alternext, which offers access to four countries. In October 2005, Deutsche Börse launched its junior market Entry Standard, which has 32 companies in sectors ranging from renewable energy to nano technology and financial services. Unlike on the AIM, companies on this market must have a fully vetted prospectus and there are no tax concessions.

In the United States, Nasdaq (www.nasdaq.com) has some small companies and it offers a more heavily regulated alternative to the AIM. The market is fully electronic, which makes it liquid and transparent.

Unless you know what you are doing, avoid US over-the-counter (OTC) stocks, some of which are quoted on the US-based Pink Sheets (www. pinksheets.com). The OTC issuers do not have to register with the Securities & Exchange Commission, the US regulator. Many OTC securities are relatively illiquid, and fraud and manipulation in this market are commonplace.