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For this month and next we are very fortunate to have a guest writer for our ‘Meet the Players’ Feature. Our Guest, who has asked not to be named, is an Account Executive specialising in AIM companies with a top City PR Company. In this month’s article we learn about the relationships between the key advisors that surround an AIM-listed company.

The AIM Advisory Circle

Some fascinating insights into the workings of AIM advisors.

AIM Rules and Advisors

A listed company will surround itself with advisors; some compulsory, others voluntarily, but all valuable and all, in my opinion, essential to the success of a publicly listed company. As an AIM private investor, you will know that these are small growth companies with strong, dynamic ambition to develop and build their business at a typically speedy pace. With such young yet active companies, you will agree that there is a heightened demand for market regulation in order to control rapid growth and protect shareholders and potential investors like yourselves.

In my experience, it can often be the case that AIM companies, especially the newcomers, are largely unfamiliar with their full time obligation and responsibility to their shareholders. I have been amazed too many times by confused clients who have thought that an LSE regulatory announcement was in fact a simple magazine article that its lovely PR agency had written for them in an attempt to secure press coverage. It is for this reason that the LSE maintains a strict set of AIM rules; concise and uniquely suited to the smaller company to ensure that the market is controlled and compliant. Further to this, it is also a requirement that each AIM company is supervised and guided by a strong network of expert advisors in order to instill these rules and safeguard the system. This is where I come in.

AIM companies employ advisory parties to ensure that their obligation as a listed company is met, company conduct is appropriate, and best practice is applied. I work as a market specialist in the field of Financial PR. I’m an advisor, employed simply to advise my clients on how to effectively communicate to the market. Other market specialists include lawyers, accountants and investor relations. However, not all are obligatory. According to AIM rules, obligatory advisors are the nominated advisors (NOMAD) and the brokers; both of which are LSE tested and approved to ensure they are eligible. It is an AIM requirement that both NOMADs and brokers are appointed and retained at all times by companies listed on AIM. Whereas, over the last 6-12 months, smaller, struggling companies have dropped PR and IR agencies due to cost cuts and hibernation! 

Getting to grips with the cogs behind an AIM company should help investors to understand why certain company announcements are released, how decisions are made, and how protected you are as an investor. I’d like to focus on the NOMAD, Broker and Financial PR agency to give you an insight, firstly into their roles as advisors, and secondly into how they interact with each other and with the AIM company to which they advise.

The Nominated Advisor

The NOMAD is a corporate finance advisor and acts as the principal regulator for an AIM company, making sure that obligation and responsibility is met. This means that all company actions – from announcing board appointments and acquisitions to dealing with crisis management, speculation and wider market issues – are assessed and regulated by the NOMAD. Their role is essential for the preservation of the market’s efficiency, professionalism and success.

To guarantee compliance, a NOMAD’s performance is closely monitored by the AIM Regulation team at the LSE and, in the event of a rule being broken, disciplinary procedures are followed which sometimes result in the removal of a NOMAD from the official register. There are currently 65 NOMAD’s listed on the official register and recently some NOMAD’s have been delisted.  I can assure you, the ones that are left are strict, thorough, compliant, and damn right stubborn; their jobs depend on it!

The Broker

All companies listed on AIM must appoint and retain an LSE approved broker; a securities house responsible for assisting and promoting share trades in a company’s stock across the market. They are essentially salesmen; a similar role to mine and I’ll come to that later. It is the broker’s job to sell a company’s story; to highlight the positives and ‘spin’ the negatives to attract potential buyers. They provide core support for a company’s share price and, I have learnt that, performance expectation for brokers is unfairly high; even though selling shares in some AIM companies is like trying to flog the FT to Katie Price, a broker will still find themselves on Mr. CEO’s speed dial for immediate answers when his share price suddenly takes the plunge!

From an advisory perspective, the broker can provide expert guidance on the market itself; explanation on specific sector performance, general market conditions, current investment trends, share price performance and details on the day’s trades, or potential investment opportunities for a company. Brokers often keep me in the loop too; if there’s something I need to know about my client, perceptions within the market, or issues with its sector, the broker or in-house research analyst will be my first call [As well as the broker, the same securities house, in most cases, provides an in-house research analyst to write detailed notes on the company, making recommendations to the investment community]. 

Financial PR

Financial PR agencies are appointed to manage a company’s communication channels with various financial communities, including journalists, analysts and investors. We are also expected to be familiar with the AIM rules and guide a company on their market responsibility and obligation, but of course the NOMAD has the ultimate say.

It is my job to oversee the publication of all corporate documentation, market announcements, and financial accounts to ensure all information used is accurate, not misleading or exaggerated, and communicated in the best way possible. Branding needs to be in line with the company’s corporate profile, key messaging needs to be strong and consistent, and we need to ensure that the company is represented in the best possible light without distortion.

We are responsible for portraying a company’s image so that public perception and confidence in the company remains positive and strong. In simple terms, I feed accurate, approved, and positive statements – with the view to minimise any negative impact – about my clients to relevant journalists in order to secure quality press articles to attract potential investors to the stock.

How AIM Advisors Interact

When advising my client on how to announce a significant change to the company’s financial profile to the market, there are times when my objectives as a financial PR executive will clash with the objectives of the NOMAD; a balancing act between obligation and desire, if you like.

As a financial PR advisor my main concern is the general perception of my clients in the market. I will therefore push to highlight the key strengths of a company in order to portray the positive viewpoint – because let’s face it; PRs hate to highlight bad news. Conflictingly, the NOMAD is not as concerned about the company’s public perception, more their own reputation and credibility. The NOMAD will work by the rules – and so they should, even though it will read as clumsily as Gordon Brown on a charm offensive. And here lies the beginning of my ‘Regulatory V Spin’ war; the back and forth rejection of my opponent’s track changes until I’ve removed the same phrase five times to the point where I actually cringe as I press send, but to no avail, regulation always wins.

It is the NOMAD’s objective to portray a true account of the financial state of a company for the good of its shareholders and the extended investment community, even though – in the case of a profit warning – the ‘truth’ is unfortunately highly negative and often comes with devastating affects for the company’s share price. Jokes aside, the NOMAD has the final say as they are ultimately responsible for the company and will take a potentially damaging fall if a company is in breach of the AIM rules.

In contrast, as I briefly mentioned above, the Financial PR agency and the broker are closely aligned in the nature of their roles. We’re both sales people who are employed to understand the core business of a company, its strategy, business model, key market drivers, market share, growth potential, and return on investment in order to promote it to potential buyers. One key difference being, we promote our clients’ stories to journalists and analysts in the hope that they will write positive articles in national newspapers and BUY recommendations in investment publications like Shares and Investors Chronicle, which in turn will be read by retail and institutional investors and inspire them to pick up the stock.

We rely on the broker to physically move the share price through increasing the demand for the stock, and they rely on us to raise a company’s profile and portray a positive perception of that company to drive buyers, via the broker, to the stock. We bat for the same team (unlike our relationship with the NOMAD at times!).

One thing I have noticed is that within the advisory circle, team work and strong relationships have become increasingly important. The recession has made the advisory role much more difficult as the weight of responsibility and the need for tight regulation has increased tenfold.

In my opinion, advisors are essential for the success of AIM, the success of an AIM company, and the success of your investments. Your shareholdings are protected by a strict set of rules; you just have to make the right investment choices. I’ll leave that one up to you.

Next month our guest PR Executive provides a more personal story of life in the City. This will provide some fascinating insights into the way that AIM-listed companies operate. - Ed

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