AIM4Tech

Sell in May and go away

Back in the old days when City bankers could get 9 holes in before work and play the back 9 before supper, the summer was a quiet time.

To ensure that the natty stockbrokers of that halcyon time didn't do anything to undermine their families' vacations - like getting stressed in the silly season - some wise gentleman (of course it was only men back then) captured the mood in the expression:

"Sell in May and go away"

Advice that would have stood many of us in great stead in 2008!

As promised last month aim4tech is presently resting in a bunker - one deep beneath the earth and sadly not on a golf course - as panic reigns and regulator wars rage above our heads.

But here, for the record, are the AIM market's stats for those for whom there can be no perception without contrast.

Nothing like the prospect of death for concentrating the mind!

It was the famous English pundit - F.E. Smith who coined the astute observation in today's headline. And as the economimc world slowly melts down, history tells us that excitement about the prospect of IPOs will be replaced by scrambles for secondary capital and a general hunkering down where anything to do with capital markets is concerned. Accordingly I expect Aim4tech to join the rest of the market in the bunker while the planet travels through the storm of storms. However, even in a storm, accurate climatological measurement is vital and so the blog will go on to maintenence mode,providing monthly data until things pick up. From now on, we will show two graphs each month:

1. AIM market activity showing listings and, more importantly, money raised;and
2. hens' teeth - or rather IPOs - whenever there are any!

For this first tick-over month we'll show the year to date IPO slides before it gets easy and remember to click on a slide to zoom in. Here's to a V curve and a soft landing!

AIM Listings Fall Off A Precipice? Yes - But Even Avalanches Have Silver Linings!

Today's Financial Times carries a chillingly headlined piece announcing that AIM IPOs have "slumped" this year.

Further down, and in much smaller print the article's authors - David Blackwell and Brooke Masters - concede that "the drop is not unique"

Damn right it isn't!

As the chart below shows, the FT's three key markets - Nasdaq, AIM and Frankfurt are all down massively on IPO volumes year on year:

Actually, I don't know why they bothered with Frankfurt - it must be something to do with the War!

And unless you are using a magnifying glass you might miss that AIM has raised more money this year than Nasdaq.

But jingoism aside - the message is stark.

As any sane market pundit would expect - no one is floating in the eye of a bear mid-credit crunch/US recessionary/pre-election market.

Actually, that's not true.

So far this year (to the end of April) 40 companies have IPOed on AIM.

32 were domestic UK companies, 4 were from offshore tax havens, 1 was from the Republic of Ireland (which is becoming something of an offshore tax haven in its own right!) and - amazingly - 2 were from the USA! And both were technology businesses

Phibro Animal Health from Ridgefield Park, NJ raised $45m in April and Lifeline Scientific from Chicago, IL raised $11m back in January.

Phibro, with offices in in Argentina, Australia, Belgium, Brazil, Canada, China, Hong Kong, Malaysia, Mexico, South Africa and Venezuela. Manufacturing facilities are located in Belgium and Brazil makes animal pharmaceuticals.

Lifeline is a global medical technology company with a family of technologies designed to improve the quality and availability, of vital organs, tissues and cells for transplantation and medical research.

So, although, as the FT article points out, these are rough times for IPO-hungry investment banks whose engines run on the fees from listings, there is still life and hope on the public markets.

Not that we should get too excited about two adds to the US AIM gene pool.

True they do add 5% to the number of US registered companies on AIM - bringing the total up to 45. But that is likely to fall again unless Maxjet manages to pull something spectacular out of the bag. (You have to feel sorry for the low-cost business-only airline - the only sector worse hit than IPO investment banks is fuel-hungry budget airlines!)

Sympathy for Maxjet and ailing investment banks aside it's worth thinking through what all of this means for that vast inventory of still-private tech companies that I described in an earlier blog.

Today's travails present two big opportunities:
1. As Phibro and Lifeline show - there is still money around for quality technology companies on AIM; and
2. The down drafts of the bear market have left a vast supply of asset-strong but market-cap weak companies on AIM ripe for reverse mergers for ambitious US companies with a growth story to tell.

Food for thought....

Happy New Year! - Stars & Stripes AIM Companies > Maple Leaves For 1st Time!

Happy New Year!

That’s it – 2007 is officially in the past. The turkey's finally joined 2007 in the waste bin of history (figuratively for me at least – I’m a vegetarian). And it’s time to look forward and figure out what 2008 holds in store.

Among the second order Christmas gifts I received was a desk calendar. For those unfamiliar with the term - a second order gift is one for which the following formula is true:

Where y = the gift and x = the giver.

That is to say that it’s a gift to which neither the giver, nor the receiver gave any thought. Which, given that it’s supposed to be the thought that counts, is rather sad!

Anyway, my desk calendar is a prime example of the genre: a dull block of recycled paper with each page carrying the date and an uplifting quote.

January 1st is a real corker:

“I dreamed impossible dreams. And the dreams turned out beyond anything I could possibly imagine. You know, from my point of view, I'm the luckiest cat on the planet.”

Just as you reach for the sick bag it turns out that these pearls are from none other than Hugh Heffner and there’s not a red-blooded male over the age of 45 who knowing precisely which dreams he’s referring to wouldn’t concur with his conclusion!

But I don’t want to get carried away (leave that to Hugh’s dreams). Before I return to the prospects for the tech industry in 2008, it’s worth checking out the quote for January 7th (doesn’t everyone read ahead on desk calendars?)

“We're going to try and recruit the very best people we can and produce the best papers we can, and publish them to the highest standards we can.”

That was attributed to Conrad Black who, it has to be said probably shares the turkey’s views of 2007 with not much prospect of 2008 being any better for him. Or 2009 or 2010 or 2011 although 2012 holds out some prospect of an uplift subject, of course, to good behaviour

So if Conrad defines the floor and Heffner the ceiling, it’s easy to feel top quartile about the year ahead.

At the core of my confidence is the relief of seeing America rediscovering how to be American.

With the Big Election approaching at speed, every corner of the 50 states is digging into its folk memory and pulling out streamers and marching bands and ticker tape. And the world is drinking deep as the planet’s TV screens show millions of real people whooping and screaming and doing what America does best – getting on with being optimistic.

This flies in the face of the economic naysaying pundits who try never to let a day go by without finding some sign or other that ‘proves’ the US is in a recession. And that, they confidently assert spells trouble for the rest of the global economy: because as everyone knows –

“When America sneezes, the world catches a cold”

Unfortunately, no one has told the good entrepreneurs of India and China that they’re supposed to be slowing down and their growth continues apace. And anyway, learned economists are now beginning to decouple America’s economic fortunes from those of the emerging economies.

If you are interested in the hypothesis, check out the Economist’s well-argued piece which certainly convinces me that China will grow at 8% or 9% even if hell freezes over.

Closer to home the near term future of the IT industry looks good too. Although cousins of the same pundits continue to devise ever more creative ways of linking the sub-prime meltdown to an inevitable demise of IT budgets, the major industry players are sticking to their 2007 guidance numbers.

This means that customers were still buying in their droves through the eye of the sub-prime storm when they should have been at their most nervous and while the market may shift towards cost saving rather than innovative solutions, there are, as yet, no sign of a major slump in 2008 revenues.

Personally, I haven’t felt as bullish as this for ages.

As regular readers of aim4tech will know, my life is spent with one foot firmly planted in technology and the other in the global capital markets and Christmas came early for me in 2007.

In mid December, ENRC – a mining and minerals company on whose Board I just joined – raised $3bn in an oversubscribed IPO on London’s main exchange.

This was good news for many obvious reasons and one less so.

ENRC is a business that is a bleeding edge exemplar of Thomas Friedman’s assertion that the World is Flat. Most of our assets are in Kazakhstan, our sales office is in Switzerland, our major customers are in China and Russia and we are subject to the regulatory regime of London!

Being part of the crew as we charted our way through the choppy waters of the IPO has given me first hand current exposure to just how London’s principles-based approach operates when it’s on steroids, comfortably accommodating all-comers so long as they are prepared to eschew centrally controlled economies and respect the power of the market.

With that particular wind at my back it’s perhaps no surprise that 2008 looks rosy. But I would add another 2007 phenomenon to my jolly bag.

Last year, as the following chart shows, saw the number of US companies listed on AIM climb above their Canadian cousins for the first time!

Admittedly it’s not a landslide– there are nearly 1800 companies listed on AIM – but the combined total for the Stars & Stripes of 46 beats the Maple Leaf’s 44 into second place.

But it must mean something - hopefully thebeginning of a trend....

A good thought for 2008 and food for anyone’s New Year resolution!

Irony, the SEC and Sarbanes Oxley - Or: Whoever Thought The Four Horsemen Of The Apocalypse Were A Laughing Matter?

Readers of the Old Testament – particularly the Book of Revelation – will recognise The Four Horsemen of the Apocalypse as the forces of man's destruction.

Although pedants and keen students of the Bible will point out that the Good Book only names Death, common usage has it that the four are named:
• War;
• Famine;
• Pestilence; and
• Death

Film Buffs on the other hand have no interest in debating the handles of evil, preferring instead to squabble over whether Rex Ingram’s 1921 WWI masterpiece starring Rudolph Valentino, does a better job of depicting fatal Franco-German familial rivalry than Vincente Minnelli’s 1962 WWII work.

Meanwhile US tech company leaders – affectionately known by their VCs as the Living Dead - and who are familiar with www.aim4tech.com will know that, as in times of yore, their ambition is dogged by the four forces of evil that ride freely on the entrepreneurial plains of America.

The latter day Four Horsemen are:
• Sarbanes Oxley;
• The SEC;
• Nasdaq’s disinterest in smaller “unpredictable” companies; and
• The Plaintiffs’ Bar

These nihilist forces work in harmony to speed the destruction of the VC-backed tech sector as we know it.

War, famine, pestilence and death are obvious bedfellows that naturally provide little opportunity for wit or humour.

What no observers of the Grim Reaper’s kissing cousins would ever expect is that there is an opportunity for irony amongst the latter day Four Horsemen.

But irony there is.

Before I go on, and at the risk of turning this blog into a dissertation on classical literature, I feel the need to call upon the Bard for help.

One of the critical junctures in Shakespeare's No 1 play - the tragedy Hamlet - Prince of Denmark– comes when the play’s eponymous character surreptitiously changes the target of the death warrant carried by his treacherous college buddies - Rosencrantz and Guildenstern - swapping their names for his.

An act that he celebrates with the words:

For 'tis the sport to have the enginer
Hoist with his own petar; and 't shall go hard

Which roughly translated into 21st century English means:

“The next best thing to sex is to turn the tables on someone who wants to do you harm”

(For the students of 16th century English having difficulty with this translation - “hoist” means to blow up, an “enginer” is a soldier whose job it was to hoist doors and walls to allow attackers in, and a “petar” (aka petard) is a small bomb used by enginers to hoist doors and walls to allow attackers in.)

Oh, and definitionally, turning the tables in suitable circumstances is the physical equivalent of irony.

And, ironically, like petards, ironic hoists can come from the most unexpected sources: in this case the relationship between the SEC and the GAO (United States Government Accountability Office).

In a surprisingly lightly reported judgement, David M. Walker - who is none other than the Controller General of the United States - found in his report “Securities and Exchange Commission’s Financial Statements for Fiscal Years 2007 and 2006” that the:

“SEC did not have effective internal control over financial reporting;”

Now I know what you’re thinking –

“This can’t be right. Surely the organisation that is charged with ensuring reporting accuracy can’t make mistakes? Or at least if they do make them, presumably they’re not material? They're probably just itsy bitsy little errors”

Well, prepare to be shocked. It may not be right – I leave that conclusion to the great American voting public – but it is correct.

The GAO report says:

“During this year’s audit, we found control deficiencies in SEC’s period-end financial reporting process, in its calculation of accounts receivable for disgorgements and penalties, in its accounting for transaction fee revenue, and in preparing its financial statement disclosures. We believe these control deficiencies, collectively, constitute a material weakness.”

“Aha!” I hear the optimists cry as they cling futilely to hope

“Material? There's a terminological inexactitude here – these terms have always been confusing – isn’t ‘Material’ less significant than ‘Significant’?”

For those of us who serve on Boards subject to the oversight of the SEC (and I sit on two) we have grown to be very familiar with the terminological difference between “significant” and “material” but for the layperson who can only stand in wonder as the big beasts with deep pockets wrestle with the agonies of the SOX taxonomy, let me quote the GAO’s definition from page 4:

“A material weakness is a significant deficiency or combination of significant deficiencies that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected.”

Hard to believe then that material weaknesses can exist in a body charged with maintaining probity in the capital markets and whose head – Christopher Cox – says things like:

“I think we all recognize that effective internal controls over financial reporting are necessary to help ensure that companies provide investors with accurate financial statements. ……………………………….. Our regulatory scheme, which is based on full and accurate disclosure, provides transparency, which fosters the success of the financial markets. If investors lose faith in the accuracy and completeness of companies' financial statements and other disclosures, they will be less willing to invest, and our financial markets will suffer.”

(Speech to Twelfth Annual CFO Summit, Tampa, Florida, May 8, 2006)

And for those still confused about the difference between material and significant deficiencies – rest easy - it doesn’t matter. The SEC also clocked up three significant deficiencies!

“We also identified three control deficiencies that adversely affect SEC’s ability to meet its internal control objectives. These conditions concern deficiencies in controls over (1) information security, (2) property and equipment, and (3) accounting for budgetary resources,”

Hard to believe, but true.

All of which raises a big question:

“Who, in their right mind would want to IPO a young high potential, fast growing, but unpredictable company on a market regulated by a body whose passion for enforcement is equalled only by their own failure to comply?"

To help you to compose your answer, here is some homework:

1. Take a moment to read the following extracts from the GAO report:

“In our review of SEC’s year-end draft financial statement disclosures, we noted numerous errors including misstated amounts, improper break out of line items, and amounts from fiscal year-end 2006 incorrectly brought forward as beginning balances for fiscal year 2007. For example, in its disclosure for Custodial Revenues and Liabilities, SEC improperly excluded approximately $320 million in collections. In another example, for its disclosure on Fund Balance with Treasury, SEC misclassified approximately $90 million into incorrect line items.”

And, given the SEC's anal focus on companies meeting deadlines:

“In addition, the cumbersome and complicated nature of SEC’s financial reporting process discussed above did not allow SEC finance staff sufficient time to carry out thorough and complete reviews of the disclosures in light of the November 15 reporting deadline.”

2. Check out the SEC’s own clear statement on the subject.

(You’ll have to dig deep for it – the SEC doesn’t do contrition - but to aid your search, start on page 20.)

3. Use Google news to exlore the piercing commentary from the fearless members of the Press whose love of irony is legendary.

Enter “The SEC's Material Weakness” - it won't take long to read the entries.

Or you could just refer back to Who Shaves the Barber” Who Regulates the Regulator? for a prescient analysis of what happens when 50% of the Horsemen of the Apocalypse find themselves locked in ironic conflict.

Which brings us back to the question:

“Who, in their right mind would want to IPO a young high potential, fast growing, but unpredictable company on a market regulated by a body whose passion for enforcement is equalled only by their own failure to comply?"

Especially when there is a perfectly welcoming alternative in London?

Rudy Does a Campos – The War Against Error Claims Another Scalp

I’ve just returned to the UK from my old stamping ground, Boston, having witnessed yet another round in the New York/London FUD War which will see thousands of US tech companies doomed to remain trapped amongst the Living Dead.

Readers of aim4tech.com will recall the great Campos blooper of earlier this year.

That was the one in which SEC Commissioner Roel Campos carelessly likened AIM to a casino with the immortal words

"I'm concerned that 30% of issuers that list on AIM are gone in a year”

As with all such events, critics of this outrageous statement fell into two camps (weak pun entirely intended).

On the one hand were ranged the cock-upists.

They put Campos’ blunder down to an understandable slip of an ill-informed Commissioner. A view that was reinforced by his response to the Financial Times’ interviewer who questioned the provenance of Campos’ data, pointing out that the actual number of annual goners was around 3% - a global norm.

On the other hand sat the conspiracists.

Their read was of a deliberate attempt to mislead those weak and vulnerable CEOs and Directors of US VC-backed tech companies who dared even to contemplate escaping the threats of being a US public company by IPOing on London’s AIM exchange.

This latter group - the conspiracists - cited Campos’ defense as proof that his statement had been a cynical example of FUD-spreading. As I learned as a trainee salesman at IBM in the 1970s – casual disparagement is very effective but below the belt behaviour.

Spread a bit of Fear Uncertainty and Doubt and you can wreak havoc in the minds of a prospective customer.

Rhetorical questions were the favoured technique of the 70s –

“Our Nobel prize winning R&D labs published a paper recently pointing out that one of the biggest challenges facing tomorrow’s systems is the mean time between failure of critical system components like disk drives. I know that the maths for mtbf are pretty complex but I assume you’ve compared the regression analyses of our disk technology versus that of the other vendor on your short list.”

This sort of thing was a sure fire winner with the chance of being rumbled very slim.

In the unlikely event that the prospect:
a) agreed with our labs’ view;
b) had done the maths; and
c) had found that our disks were not the most reliable

all you had to do was say “Gosh, I’m surprised, totally amazed. This is a vital discovery that I need to communicate back to our Nobel prize winning boffins so that they can review their programs to ensure that our future products remain world-class. At least they’ll be able to understand your calculations - by the way, do the other vendors on your list have direct access back to their labs? Oh, and how many Nobel prizes have their scientists got?”

Now I admit that in the cold light of 2007, that all seems rather convoluted – but if you are a vintage IBM salesman or customer from the 70s it is guaranteed to instil waves of nostalgia!

Obviously it would have been so much easier to lie and quote some spurious statistic like “Our disks are 5 times more reliable than everybody else’s – only a fool builds a mission critical system with anything less than the most reliable core components.”

And if the Prospect caught us out lying all we had to do would either deny having ever said what he thought he’d heard us say, or reply “Oh I’m sorry – the numbers I was given must be wrong, let me go back and check and get you the correct figures.”

But for the IBM salesman of yore, we were unable to adopt either stratagem – for two reasons:
1. Lying is wrong before God and
2. Disparagement was a capital offense leading to summary dismissal

Fortunately for SEC Commissioners the standards aren’t as high and Mr Campos able to brush his entirely gross FUD attack by denying he had meant what he said - asked by the FT if he felt that Aim was a casino, he said:

“Absolutely not, I don’t believe it’s a casino and that was not the intention….What I was referring to was a generalised situation in which if [regulatory] standards are ignored and you have a spiral downward you could get into a situation where an exchange could be nothing more than a casino.”

Proof, the conspiracists claimed, that the Casino remark was deliberate misinformation designed to cause harm, confident in the knowledge that even if the truth is discovered most of the slur will stick because almost no one who read the first headline will ever the second.

Well, it’s not for me to judge whether it was a conspiracy or a cock-up.

I’m a Brit – and therefore brought up in a land whose manners dictate that it is unacceptably rude to impugn the motives of friends.

And we are friends – to quote the poster at BA’s Logan airport check-in desk – The UK and US Stand together.

But I am beginning to have my suspicions…..

It was a fine Fall day last Thursday and I was in Copley Square’s Au Bon Pain. At my table someone had left a copy of USA Today – I wonder whether anyone ever actually buys USA Today? – and as I idly flicked through it looking for some news (any news) I came across the Giuliani Prostate scandal.

Quoting an AP story the paper described the prospective Presidential candidate’s New Hampshire radio ad promoting his approach to healthcare reform. Using his illness to illustrate a message that the private insurance market will provide the best care he says:

"I had prostate cancer, five, six years ago,"

"My chance of surviving prostate cancer, and thank God I was cured of it, in the United States: 82 percent," he says. "My chances of surviving prostate cancer in England: only 44 percent under socialized medicine."

So here we have it – yet another reason to avoid our primitive cousin across the Atlantic.

We may stand together, but it’s better to keep our distance.

Not only are their capital markets little more than gambling houses (I thought that was what all capital markets were – but no matter!) the sheer unevolved state of the place is such that grown men are much more likely to die from malignant growths.

The message is clear - avoid the UK and all things British.

As you will already have guessed, Rudy’s claims were as specious as Campos’ – as overgrown as a terminal stage prostate.

So much so that it prompted the British Health Minister – Alan Johnson – to make a rare public intervention by a British politician in a US Presidential candidate campaign by pointing out in London’s Times newspaper:

“The British NHS should not become a political football in American presidential politics. Our rate of prostate cancer survival is actually much higher than has been claimed. The latest data shows a survival rate of over 70 per cent – and increasing.”

Undeterred by the facts – and probably confused by the interjection of a complex sporting analogy – a spokeswoman had previously insisted that Giuliani would continue to repeat the statistic and run the advertisement. The Times reported that she said the 44 per cent figure came from an article in a “highly respected intellectual journal” published by the right-wing Manhattan Institute, which he had read because “he is an intellectually engaged human being”.

And as Eugene Robinson points out in a Washington Post Op-Ed piece, those interested in the maths of the subject will find it is much more complex with the correct comparator being mortality – deaths per 100,000 of the male population.

Not surprisingly for two civilized countries on this measure the USA and UK are level pegging.

As of today and despite having its data so roundly criticised, the joinrudy2008 campaign site has remained totally silent on the subject. But then there’s no need to coment or issue a correction – the damage is done and the FUD is in circulation.

Now what does this have to do with the NOs – the Nasdaq Orphans?

Well firstly, CEOs contemplating their escape from the Living Dead can rest assured that their risk of death from prostate cancer is independent of which of the two main markets they choose for their IPO. And, to illustrate how facts can be presented to give the wrong impression – unlike most prostate-related issues the Atlantic equality is true for men and for women.

But more importantly, Rudy’s blooper is a wake-up call to the NOs’ CEOs to check all assertions about the world’s capital markets prior to deciding whether to list on AIM or to wait forever for a Nasdaq IPO.

I continue to recommend that all grown up companies seeking an IPO on a market designed for the operationally uncertain realities of relatively young companies visit the UK to check its relevance to their strategy.

Unfortunately I can’t issue the same enthusiastic invitation to Rudy.

If he is lucky enough to visit the UK in the near future (and with £1 changing hands for $2.05 he may find a lot to learn about economic management) he’d better only come if he’s in the rudest of health.

Or put another way – intellectually engaged human being or not (and I leave that judgment to others) he should spare no effort to stay out of the hands of our healthcare professionals who may find their treatment of folk who indiscriminately launch FUD missiles is less susceptible to the Hippocratic Oath and more to every citizen's solemn duty to fight the War on Error.

The Age of IPO Market Turbulence - A Conversation With Alan Greenspan

It was George Bernard Shaw who once observed of America and the UK that we are “two nations divided by a common language”

Students of this particular claim and of our common language in general will doubtless know the work of another great Irish playwright, wit and author of such classic works as Dorian Gray and The Importance of Being Earnest – Oscar Wilde.

Note: For the pedants amongst my readers there will be some upset now for technically Oscar was Anglo-Irish, and that’s important for those who would claim him as their own. However I’m just a simple Anglo-African (with bits of Russian) and I believe that although Oscar was born in Dublin before the Easter Uprising of 1916 and so technically was a child of the English colonial era – his full name eliminates all doubt of his true heritage – Oscar Fingal O'Flahertie Wills Wilde!

But I digress.

The reason I mention Wilde is because “Earnest’s” female lead – Lady Bracknell – is particularly famous for two lines. One has to do with handbags and the other, delivered when the hapless Earnest (who is also known as Jack – for reasons too complicated to describe now if you don’t already know the plot!) has just explained that he is an orphan:

“To lose one parent, Mr. Worthing, may be regarded as a misfortune; to lose both looks like carelessness.”

Now I mention all of this because this week I had the honor of hearing one of the English language’s most lucid speakers not once, but twice.

To some this might seem like masochism - aren't there enough things to attend without going twice? - and to others mere gluttony. But it must be said that only a fool of Wildean proportions would pass up any opportunity to hear the man who is famous for saying something along the lines of:

“If you think you have understood me, then you haven’t been listening.”

Yes! This week I rolled up to hear Alan Greenspan speak twice.

The first was a rather grand affair at Reuters and the other, a more homey one hosted by KPMG at "the epitome of British style Claridge's.

The Reuters do (and here I declare my interest as a Director of that wonderful company) was very stately with speeches by our revered Chairman – Niall Fitzgerald – our fresh (or more properly, given the election fever currently raging through the UK, I should say our "current”) Prime Minister – Gordon Brown – and his replacement at the Treasury – the little known Alistair Darling (whose unchanging looks I suspect owe more to Dorian Gray than to the family in Peter Pan).

It was a very good affair. Against a backdrop of Greenspan shamedly pushing his book - The Age of Turbulence - and Brown unashamedly pushing his right to remain the leader of the world’s 5th largest economy and America’s greatest ally, we were treated to a riveting analysis of post Cold War economics delivered in the dry but enlightening style for which the ex-Fed Chairman has long been famous.

In contrast to Reuters, the KPMG event was a cosy fireside chat (albeit without a fireside, due, no doubt to the current European mania for health and safety rules) between Mr Greenspan and KPMG(UK)’s Vice Chairman Alistair Johnston.

That being said, the biggest difference between the two events wasn’t the political stature of the speakers or the standing/seating arrangements, but rather that at KPMG, because there were no pre-election speeches, there was time to ask questions.

Many years ago I decided that when attending lectures and seminars it is a wise tactic always to sit at the front. There are three reasons for this:

1. It’s more interesting because by being in the thick of things, even on mediocre occasions, it is hard to become bored or to fall asleep;
2. Because you can always catch the speaker’s eye you can be guaranteed to be able to ask a question; and
3. You can see and hear everything.

Admittedly this last point has only become important with the advancing years as the distance away from University lectures grows ever greater!

And to stick with the historic theme, I admit that I hadn’t fully developed this model when at University – in fact in truth I was an enthusiastic adherent to the obverse theory of levturee positioning (ie sit at the back) but it’s remarkable just how much more interesting presenters have become since I left Cambridge!

So, true to my principles, I duly sat at the front and was pleased to pose the only question that raised a laugh.
Ever faithful to my readers' interests I asked:

“We in the UK who work in the capital markets, especially AIM, have been very grateful recipients of the consequences of the US approach to heavy handed regulation such as Sarbanes Oxley. How much longer have we got?”

Alan’s first answer was a little disappointing – “Not as long as you’d like”

But, as he got into his stride with substantive reply, I quickly realised that he too had only been playing for laughs and was not actually predicting an early change.

He made the following points:
1. The US had over reacted by writing a hastily-drafted (and therefore poor) law in Sarbanes Oxley in general and Section 404 in particular. In his opinion SoX would eventually be reformed, but in the meantime there were two unintended and unfortunate consequences.
2. The first was that compliance overkill is leading to a damaging reduction in constructive managerial creativity and
3. That the law had turned accountants from being helpful scorekeepers into policeman with negative consequences for just about everything other than their fee incomes.

So there you have it – from the mouth of one of capitalism’s most powerful contemporary advocates and a man whose wit and eloquence will easily stand muster against those of Shaw and Wilde.

As Lady Bracknell might have said to one of the 4000+ hapless CEOs of US VC-backed technology companies and their Boards:

“To lose one opportunity to IPO (on Nasdaq) may be regarded as a misfortune; to lose both (by not seizing the opportunity presented by London’s AIM) looks like carelessness.”

Labor Day’s Behind Us – Time For A Union Of The Living Dead?

That’s it.

The kids have gone back to school, the yard’s been treated, the furnace serviced and now it’s a clear run til Thanksgiving.

Labor Day has always been an ironic institution. As everyone knows it was initiated in the 19th century by the Central Labor Union as a day of rest so really it should be called No Labor Day.

And for most of the nation’s employees, government workers and the unemployed the first Monday in September has become a payless Labor Day with the time spent away from the factory or office dealing with a list of domestic chores that has built over the preceding months.

Unfortunately the same isn’t true if you’re the leader of a tech company with 6 or 7 or even more Labor Days behind you.

For you and all of your peer members of the Living Dead, Labor Day marks another period of deep reflection as you contemplate the agonisingly distant prospect of that perpetually elusive goal - an exit.

Even as you reorganize the garage, sew name tags into the kids’ clothes or whatever you find yourself struggling to summon up another wave of enthusiasm to deal with your ever more irritable shareholders as the prospect of another 12 months of hard labor come into closer relief.

First let me say that the term “Living Dead” isn’t my term. It’s one used in the US VC community to describe all of their existing portfolio holdings that were going to be sure fire 10-baggers when they put their money in back in 1999, 2000, 2001, 2002, 2003 and 2004.

Today of course, those companies bear scant relationship to those shiny new businesses contemplating the arrival of their Series A Round back whenever. Now saddled with layers of preference shares that make the global debt market’s structure seem simple, the Living Dead are soldiering on unglamorously dong what businesses have done since time immemorial – business.

Unfortunately V 2.0 of business isn’t as compelling as V 1.0 was.

Back then the talk was of planetary domination – “the leading global supplier of xyz” was the priapic boast of every company’s website. Today’s ambitions are more tempered and the tech leaders who remain in place (or more likely - their replacements) are focused on the challenges of delivering enough organic growth to satisfy their owners (cash for acquisitions dried up long ago) while worrying about how little their own ever-diluted share of the company is worth.

The lucky Living Dead (if that’s not an oxymoron) are those whose VCs have so lost interest (or been fired) that Board meetings happen only rarely.

The real losers are those who have to endure a monthly beat-up session in which their wholly unreasonable refusal to contemplate a bargain-basement fire sale to a trade buyer is picked over in fine detail by their bellicose but otherwise impotent shareholders.

The real real losers are those who, having survived another Board meeting from Hell have to go home to explain to their partner and children why the dream of early retirement, holiday homes on the coast or merely the best schools for the kids, have had to be put on hold for another month!

Perhaps the leaders of US tech companies should take a leaf from the books of an earlier generation of downtrodden workers by forming a Union so that they can rise up against their oppressive owners?

Perhaps something along the lines of the Noble and Holy Order of the Knights of Labor who organized the original Labor Day on September 5th 1882?

Started by Uriah Stephens and a group of Philadelphia tailors in 1869, the Knights of Labor set the scene for the institutional organization of those who lived by the sweat of their brows rather than off others’ capital for a generation.

Under the motto – “An Injury to One is the Concern of All." - the Knights were responsible for many innovations such as calling for a 24 hour work week and welcoming as members women and blacks (although inexplicably they excluded Asians!).

Among their more novel quirks was the exclusion of bankers, doctors, lawyers, gamblers, stockholders, and liquor manufacturers on the grounds that they were unproductive members of society.

We are probably a long way from the formation of the Knights of the Living Dead or The International VC-backed Stalled Tech Company Leaders Association to counter the oppressive employers represented by the fat cats of the NVCA.

But I guess if some brave souls were to form a Union of the Living Dead their exclusion list would be topped by Preference Shareholders.

Unfortunately next September’s streets won’t be full of chino-clad tech CEOs marching in mutual support under the banner "A hurt to one is a hurt to all".

Mind you if this year is anything to go by they will all be at the office slaving away over spreadsheets trying to figure out a way to avoid a Groundhog Day amongst the Living Dead in one year's time!

Coming Home: From New Jersey, to AIM to NASDAQ – The Round-trip IPO!

As educated readers of aim4tech.com will no doubt know, Amazon will sell you two quite different DVDs titled “Coming Home”.

The first – the classic released in 1978 and starring Jane Fonda and Jon Voight - is the massively powerful commentary on the Vietnam War seen through the lens of the men who went to fight and their women who waited behind.

The non-identical twin of the Fonda/Voight saga is the movie version of Rosamunde Pilcher’s blockbuster novel of the same name. This one starred the very lovely Joanna Lumley and Peter O'Toole and is also about the effects of war on ordinary people, although this time it’s WWII that acts as the story’s pivot.

So which is the real Coming Home?

A bit of investigative digging reveals that, in a flagrant disregard of international IP laws and cocking a hearty snook at the special transatlantic relationship trumpeted this week by leaders Bush & Brown, Ms Pilcher ‘borrowed’ the title for her book when it was published in 1995.

Clearly she liked the name and could see no reason to let petty regulation stand in the way of her own pursuit of fame and wealth.

As a dedicated follower of Adam Smith I find this open-minded free market attitude to commerce massively refreshing and a very helpful theme for this edition of the blog.

Coming Home is a constant theme within literature capturing, as it does, the need of humanity to return to our roots in order to find true happiness and personal fulfilment.

Nowhere is this more true than in the realms of international capital – or at least – US perspectives of international capital.

I have lost count of the CEOs of NOs (Nasdaq Orphans) who start out all excited by the prospects of realising their websites’ promises to become truly global suppliers by IPOing on London’s AIM exchange.

One minute it’s all macho bluster and then their CFO steps up and reminds them that floating abroad is, well…..abroad.

And abroad is foreign, dirty - a form of self-imposed exile - a bit like dodging the draft.

The only true path for a real man, they assert, is Nasdaq.

“You see.” these quivering wrecks will say.

“Since I wrote my first line of code/sold my first solution/raised my first Series A round, it has been my singular ambition to float on Nasdaq. Nasdaq comes a close second to apple pie and ahead of Motherhood on the scale of life.”

And their lips start to tremble as they sob:

“I know that if I go to London I will raise loads of cash, raise my profile, gain paper for acquisitions, get rid forever of my preference share holders and get to take money off the table for myself and my family – but I will have to give up Nasdaq.”

And at this point a mantle of deafness falls over the CEO and, though he watches my lips move, he doesn’t hear me say:

But that’s just not true.

Even if a company chooses to taste a life far away in a land free from the Four Horsemen of the Apocalypse (Sarbanes Oxley, the SEC, Nasdaq’s disinterest in young companies and the Plaintiffs’ Bar) it can decide that milk and honey is too fattening a diet.

And there is nothing to stop them from a Nasdaq IPO.

Nothing at all.

An AIM IPO isn’t like boarding the Mayflower - it’s like a trip booked with Expedia.

And if I can ever get his attention long enough to explain to a NO CEO that it’s perfectly possible to have a round-trip strategy, they look at me askance and say, always in a disbelieving tone

“But has anyone ever done it?”

Oh dear! Oh dear!

The pilgrims who settled the East, and the pioneers who won the West, must spin in their marked and unmarked graves as they hear their weak-kneed descendants sounding more like home-bodies than homesteaders.

To a Brit this all seems very un-American. Imagine what a dull movie Apollo 13 would have been if everyone at Houston had said “well we told them that they could never get back.”

Fortunately it no longer matters because today saw the upbeat inaugural webcast of a round-trip pioneer’s results as Ocean Power Technologies announced its maiden Nasdaq numbers in a webcast at 11:00 EST.

Theirs is the typical tech start-up to riches story that powered the growth of Nasdaq (and much of the US economy) in the 80s and 90s. Founded in 1994 as a Delaware corporation and based in New Jersey, Ocean invented PowerBuoy™ technologies to harvest the sea’s energy.

In their early development stages they installed prototypes off the coast of Atlantic City and gratefully received money from the US Navy.

In 2004 they became Stage 1 pioneers by floating (sorry – I couldn’t resist it any longer) on London’s AIM. They raised around $50m with a market cap north of $120m (calculated at today’s rate of 1 Starbucks skinny latte to the $5.00).

Ocean Power used this money and profile to expand internationally, picking up the former Managing Director of Powergen’s Generation Business as European head and winning contracts for systems in Spain, France, England and Scotland as well as continuing to build their US flipperprint with generators off Hawaii and Oregon.

This year, flush with those successes Ocean Power made waves by following in the Pilgrims’ footsteps by adding a Nasdaq listing to their London quote.

In true Rosamunde Pilcher fashion, on May 1st OPT was joined by OPTT as the company made its IPO on Nasdaq.

But unlike Coming Home, the result wasn’t nominal confusion.

Instead the principal result was - money!

The OPTT Nasdaq release says it all:

“Ocean Power Technologies, Inc. announced the completion of its initial public offering of 5,000,000 shares of its common stock in the United States at $20 per share. The Company received net proceeds from the offering of approximately $90.1 million after payment of underwriting discounts and commissions and estimated offering expenses. The shares sold in the offering are listed on the NASDAQ Global Market and the Company plans to apply for these shares to be listed on the AIM market of the London Stock Exchange. The Company intends to use the net proceeds from this offering to: construct demonstration wave power stations; fund minority investments in OPT wave station projects to encourage market adoption of our wave power stations; fund the continued development and commercialization of our PowerBuoy systems; fund the expansion of assembly, test and field service facilities; expand our international sales and marketing capabilities; provide working capital and funding for other general corporate purposes, including potential acquisitions of complementary products, technologies or businesses. The joint book-running underwriters for the offering are UBS Investment Bank, Banc of America Securities LLC and Bear, Stearns & Co. Inc. First Albany Capital Inc. is acting as co-manager.”

Now if that doesn't strike confidence into the hearts of every wannabee Nasdaq CEO, I'm not sure what will.

As the share price graph below shows (click on it for more detail) - OPT has enjoyed a grown-up ride as a public company:

And you know what makes it even more interesting – Ocean Power Technologies still don’t make any money!

Check out their financial highlights below:

But there are over 100m reasons why the management of Ocean Power don't mind!

As described in an earlier blog there are 5000 privately owned companies in the US tech inventory.

While they sit on their hands waiting for their turn over the next 12 years to make their break for freedom, the management of Ocean Power Technologies are racing ahead with their vision.

Remember those days when exciting companies made their IPO on Nasdaq and all was well with the world?

For those CEOs who want to return to those days, there is a round-trip ticket available!

And those who choose to take it don’t even have to be pioneers!

Lies, Damned Lies & The Truth Of AIM's Statistics: Results H1 2007

When I spoke at the Reverse Merger 2007 Conference in San Francisco last month, I kicked off my Panel with a slide depicting the three greatest lies and their authors:

The more astute amongst my readers – hopefully a large number – will notice that there are actually four lies on the chart. This was a joke that I thought was immensely funny in California – ie even the number was a lie – but I’m afraid that it only served to confuse my audience who were there for the serious business of finding ways to avoid a straight IPO on Nasdaq and weren’t in the mood for humour.

The London Stock Exchange (and owner of AIM) has just released the data from the first half of 2007 which add further proof – if more were needed – that the top two Great Lies are just that that – lies.

To understand my confidence in that claim, it is necessary first to take a look at the size and shape of AIM measured by the market’s overall capitalization, the number of companies on the market and the amounts of money raised for how many companies.

MARKET CAP

As you will see from the table, the geometric growth of the market is captured in its total value of $215bn.

Smaller than Nasdaq is today, but hardly irrelevant!

Although this was calculated at the embarrassingly high conversion rate of $2 to £1 (which, by the way, makes a Starbucks Skinny Grande Latte cost $4.50 in London!) the conversion rate is constant throughout the table and so the comparisons are not skewed by exchange.

For those interested in trajectories, that $215bn is double the closing value of 2005 ($107bn) and four times the aggregate market cap at the end of 2004 ($60bn).

NUMBER OF COMPANIES LISTED

At June 30th 1,656 companies were quoted on AIM – twice the number at the beginning of 2004. And, although it’s not shown on the chart, 600 of that 1,656 had a market cap greater than $75m – the SEC’s SOX cut-off for small companies.

AMOUNTS OF MONEY RAISED

Great tales of scale are always interesting, but not particularly relevant if you are the leader of a company – all you care about is “what’s in it for me?”

The same chart gives a clue to the answer if you take a look at the sheer waves of money raised on the market – nearly $20bn so far this year. And, more importantly, the majority of it was in secondary (further) rounds showing the maturity of the market’s liquidity profile.

AIM is clearly in its stride as ‘safe’ market for earlier stage companies – ie Sandvine and OCZ rather than Microsoft and Motorola.

But as important is the data that supports the market’s claim to be

"The most successful growth market in the world."

This next slide shows how AIM has evolved from its origins as a largely domestic exchange to welcoming an ever-increasing proportion of international companies to its ranks - 28% in the first 6 months of 2007.

Of even greater interest to tech company heads is how much money is raised for each IPO.

The answer is an average of $48.5m in the first six months of 2007 which is consistent with, although marginally up on the last 18 months average of $44m, as shown below:

And the last question answered firmly by the first half’s numbers is “What’s the liquidity like?”

This is always the thorny one because, as every American student of AIM knows, this is supposewd to be AIM’s Achilles’ heel.

Well, be prepared to be shocked (again!) as the last slide shows – it may well once have been true that liquidity was volumetrically low – but not since 2003.

An average of 550m shares worth $460m traded daily from January to June this year.

It was a cynic of another age who once dismissed numerical analysis with the throwaway line

"there are lies, damned lies and statistics".

But even he would be hard pressed to defend the three greatest lies (or four if you haven’t been following) in the face of such overwhelming statistics.

That being said, the tech world is full of cynics, so if any of my readers are interested in challenging the conclusion that AIM is
a) alive & well,
b) welcoming to non-UK companies and
c) a place where significant funds are raised for companies that go on to grow rapidly after years of imprisonment in private hands,
go run your own slide rule over the numbers –they’re to be found here.

And then ask just why only 13% of the International companies listed on AIM are from the USA.

Beats the heck out of me!