LSE takes aim for Europe, but can it fire?
A pan-European growth market could significantly boost EU GDP, but there are obstacles to putting it in place.
The London Stock Exchange’s plan to attract more European companies to its junior market, AIM (the Alternative Investment Market), makes sense, but it won’t be easy to put it into effect.
The LSE has been highly successful at attracting foreign issuers over the past couple of years, and now has more foreign companies listed than the New York Stock Exchange. It has been helped in large part by the financial burden companies seeking US listings face in complying with the Sarbanes-Oxley Act, which has deterred many of them.
AIM has had far less success than the LSE in attracting foreign issuers. Companies from the European Economic Area (the 25 EU states plus Iceland, Liechtenstein and Norway), excluding the UK, have raised just £1.7 billion on AIM, a fraction of the £20 billion total market capitalization.
This is partly because until the new initiative was announced AIM had not paid much attention to continental Europe, focusing instead on attracting companies from Australia, Canada, Ireland and the US.
AIM’s ambition to become a pan-European growth market faces several obstacles, the most glaring of which is Europe’s fragmented clearing and settlement infrastructure and the high costs of pan-European trading.