AIMprospector
Executive Insight is a new AIM Prospector feature. Each month, AIMprospector brings a collection of advice and insight targeted at company directors. The second contribution to this series comes from Mr Adam Hart. In the last issue, I discussed how the careful selection of advisors can help an AIM company get maximum value from its listing. Below, I examine some other important factors that can have a material effect on a company’s share price. If an AIM company cannot deliver an interesting growth story to attract investor attention it will be hard to achieve share price momentum. If a company repeatedly fails to deliver growth, it is questionable whether it should remain on the market at all. Long-term growth is the key to delivering share price performance. But even some companies that are delivering regular profit increases fail to secure real investor interest. If your company falls into that category, a collection of actions might help change this. Setting sensible targets and providing a regular news flow to the market will generate investor interest and trust that future growth can be achieved. Even setbacks, which are bound to occur, can have a minimal effect on the share price if plenty of warning is given and a full explanation is provided. A last minute and badly thought-out explanation can wreak havoc and take years to repair!
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There is little point in generating newsflow and then not capitalising on it by actively pursuing the press. A good PR company should be able to gather a roster of positive journalists for even a small company where its story is consistently good. Senior management must then spend time meeting with both existing and potential investors — institutional and private investor forums alike. The availability of easily digestible information on a company is also key. A well thought out and readable website is a great place to start, but they are often not updated for recent events. Regular public statements over and above the interim and annual reports are useful to track changes, and hats off to those AIM companies that publish interim management statements as they are not compulsory on AIM. However, nothing beats a comprehensive research report from an independent research house or the company’s own broker. Such research, describing a company’s business and opportunities, is an excellent basis for assessing a company’s prospects. Finally, research has shown that those companies that are able to pay a regular and rising dividend generate
Adam Hart, London Bridge Capital
Executive Insight
significantly more investor interest and are able to achieve positive share price momentum more easily. Even a relatively modest, but rising, dividend should not be underestimated. Too many companies, which have the potential to shine, hide themselves away. This is to their own, and their investors’ detriment. Although the above suggestions take time, effort and cash, the resulting change in perceptions can generate significant rewards for investors. If executed well, a significantly lower cost of capital will be achieved should a company raise finance in the future.
Adam Hart is Chairman of London Bridge Capital. He enjoyed a long career as a nominated adviser acting for many AIM companies and served on the Stock Exchange’s AIM Advisory Group for over 14 years, spending more than five years as Chairman.
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