Can the Capital Access Window finally revive AIM?
August is usually a sleepy time for capital markets. Investors head off on their summer jaunts, firms take a breath after a frenzy of results in late July and advisors start mapping out back-to-school plans for September. Not so in the world of regulation.
This year, Britain’s watchdogs have introduced what could prove one of the most significant rule changes in decades for companies listed on AIM: the Capital Access Window.
This voluntary mechanism, which garnered almost unanimous support when regulators first tabled it in June, could open and improve companies’ access to capital on the London Stock Exchange’s junior market while protecting them from wild swings in their share price.
The London Stock Exchange hopes it might help turn the tide after a bruising year for the smaller, growth-focused market.
AIM’s Capital Access Window
The Capital Access Window is not revolutionary in its structure – similar models are used in other markets worldwide, notably Australia – but the change will provide a key protection by allowing companies to request a temporary suspension of their shares while they pursue a capital raise, ideally for only a few days or weeks.
“The significance of this should not be understated,” says Alex Stella, Managing Director at InvestorHub, adding the change is not just about making it easier to raise capital. “It’s a common sense move. Did it really ever make sense that shares could continue trading whilst such significant capital events were discussed up and down the Square Mile?” he adds.
This might seem like a minor tweak, but it removes many of the issues companies face when they begin initial discussions with brokers and investors while planning to raise funds.
“Most companies have experienced the worst of capital raising: you begin discussions with your brokers and investors (theoretically under confidentiality) and the share price drifts downward. The price never ends up being near the initial plan,” says Stella.
Under the new Capital Access Window regime, a company can request the suspension of its shares while it negotiates with brokers and major shareholders. There’s no need to worry about reforecasting if the stock price underperforms during this period of uncertainty.
Only a week after the new rules took effect, Shaires Holdings became the first AIM-listed company to test the waters.
Formerly known as Jade Road Investments Limited, Shaires wants to become the go-to investment company for UK investors looking for exposure to the world’s largest private AI companies.
To help fund its initial investments in Anthropic, Stripe, ByteDance, Moonshot AI, Figure AI, SandboxAQ and Colossal Biosciences, Shaires has launched a retail offer for UK investors alongside an institutional placement. The company said it is targeting a total raise of $100m across first and second institutional transfers and the retail offer.
The Capital Access Window will allow it to reach a broader range of investors. Under old rules, companies struggled to meaningfully include retail or HNW investors because they had such a short window to talk to them. Often far less than 24 hours. The new rules will level the playing field and open it all up.
Shaires launched its retail offer on the 13th and today announced the close of the fundraise and Capital Access Window. With $3.4m raised from the WRAP Retail Offer along with two institutional fund raises and other commitments, the firm says it has now raised $108m this year, exceeding its planned $100m total.
The day before Shaires announced its closing, Rockhopper Exploration said it would use the Capital Access Window to raise cash to fund development work at its key oil and gas interests in the North Falkland Basin.
Another AIM-listed firm, GEO Exploration Limited, has today announced it intends to utilise the Capital Access Window. The company hasn’t yet revealed the details of the raise, but the suspension should allow management more time to work out the details – exactly as the rules intended.
Continued work
The Capital Access Window should build on the work the FCA has already done to improve retail access to UK markets. Earlier this year, the Public Offers and Admissions to Trading Regulations came into force, designed to help widen everyday investor access to public equity and debt capital markets by cutting the cost of raising capital.
As a direct result of the changes, retail capital’s share of all equity capital raised in the UK has risen to the highest in seven years. One in three UK equity raises now carries a retail tranche, up from roughly one in 10 in 2020.
The shift has also been helped by technology and the development of platforms such as RetailBook, which has helped to coordinate nearly half of all fundraisings involving retail investors. And the platform expects the new Capital Access Window to add another tailwind to the funding backdrop.
“For three decades, AIM has helped ambitious companies access the capital they need to grow, creating some of the UK’s most compelling public-market success stories,” says Nick Dilworth, Managing Director of Legal, Risk and Compliance at RetailBook
“The new Capital Access Window builds on that legacy, giving companies a more controlled and certain environment in which to raise capital.”
Regulators have made a significant effort over the last two years to open up the UK’s capital markets and while it will take some time for the benefits to become clear, the initial signs are positive. Companies are responding and so are investors.
Let’s hope the momentum continues.