Crosswinds – David Cohen

This article is the first in a series of articles on practical steps for Israeli companies seeking to list on London’s Alternative Investment Market

1.  You need to be a company at the right stage of your evolution.

Since the bad old days when every 2-bit company considered listing on AIM and raising a couple of million pounds, the reality is that AIM has had a shake-up making it much more attractive and responsive to growth stage companies but not start-ups.  AIM was acquired by the London Stock Exchange and since then has even been used for capital raises of £80 million and more.  It is a mature market and rewards mature well-managed companies which have an appropriate balance sheet and market potential.

2. Get your house in order – be prepared

Listing is a process that can take between 3-6 months or more from the moment the company decides to embark on its path towards listing.  The most important aspect of a smooth transition to being a listed company is to have the company’s affairs in order at the outset.  It is worth giving this considerable attention well before you even set out on your mission. Many times I have seen Israeli technology companies where the due diligence (both legal and financial) is in a state which is less than ideal in terms of both corporate governance and the willingness of the founders to relinquish a certain amount of control commensurate with being a public company.  Company founders or CEOs have become used to running the organisation as their personal fiefdom.  This is perhaps the biggest cultural change to which a company’s management will need to adapt.

As regards the due diligence materials which I will require in order to prepare a comprehensive due diligence report for the NOMAD these materials a/ need to be comprehensive and orderly and b/ the inevitable gaps that appear need to be plugged (agreements not signed or dated, resolutions partially adopted, articles to be amended etc.).  The more lacunae there are the longer the listing process will take as the NOMAD will not accept a final due diligence report which contains issues which have not been addressed by the company.

3. Obtain prior consent of your shareholders

The company may have sustained since its inception with a motley mix of investors, both private, corporate and even some institutional.  These shareholders may hold various rights – preferred shares, special voting rights, liquidation preferences for example.  The shareholders need to be onside with the concept that they will need to give up these rights as when the company’s share capital is admitted to trading, there needs to be a single class of shares, all with equal rights.  As the NOMAD will require as a pre-requisite the resolution of the shareholders agreeing to these issues, it is highly recommended to seek their formal consent to a/ the process and b/ to the change of rights and constitutional documents as required, at the outset.  This will also prevent delays when the process moves into high gear as the logistic of obtaining signatures from disparate investors around the globe and possibly based in different geographies, will have been addressed at the outset.  This prevents uncertainty and removes one cause for delay.