Paydirt for May 15, 2018: London calling: The potential benefits of an AIM international market listing

2018.05.15 PNN Paydirt Harris AIM.jpg

A backgrounder Q&A with new Pennine director Jon Harris

 

It’s helped startups take “aim” for more than two decades.

Since its 1995 launch, the London Stock Exchange’s AIM international market has helped more than 3,600 companies raise more than CAD$170 billion in development capital.

And about 60% of the funds raised on AIM have been through further issues, which shows companies’ and investors’ long-term confidence in the market.

London’s Jon Harris, who joined Pennine Petroleum Corporation (TSX-V: PNN) last month as a Non-Executive Director, has served similar roles for several AIM- and TSX-listed companies during his 30-year international management career. He’s also led two AIM listings for clients in the past decade.

Paydirt recently caught up with Mr. Harris to ask him about his experience with the AIM market.

 

Q: You were a Non-Executive Director for Bankers Petroleum Ltd. (TSX/AIM: BNK) from 2004 through 2016, and were on the board during Bankers’ successful AIM listing in July 2005. Bankers accounted for nearly 6% of Albania’s GDP in 2014. What benefits did Bankers see from the listing?

A: We gained access to UK institutions which supported us in subsequent fund raisings. I think it also helped secure funding through institutions like the EBRD (European Bank for Reconstruction and Development) and IFC (International Finance Corporation).

 

Q: Why do you feel Bankers was successful in its AIM listing, i.e. the company's value proposition that won over the committee of Nomads?

A: Market conditions were good; Bankers already had a TSX listing and producing assets. Our Nomad (a dedicated Nominated Advisor who plays a central role in the life of an AIM company) had Canadian connections and had worked with us on the TSX, which meant they already knew the company and its operations.

 

Q: You've led AIM listings for other clients over the past decade. Generally speaking, in your experience, what does AIM exchange leadership want to see in these AIM hopefuls?

A: I think AIM has changed over the years and has become more regulated; for example, the requirements of CPRs (Competent Person’s Reports) are much more demanding than was previously the case. Like any exchange, AIM wants to see success stories—and there definitely are some out there—and relies on Nomads to filter opportunities to identify those most likely to succeed. The emphasis now seems to be more on execution risk, as this is the key variable that determines success or failure.

That said, the other listings I have attempted were unsuccessful mainly because of market sentiment towards the commodity (bauxite) and political/infrastructure risk associated with the locations of the projects (West Africa), rather than execution risk. Although we had engaged Nomads on each, they were unable to secure the lead investor needed to get the funds required and, in each case, the companies withdrew from the process.

 

Q: What similarities do you see between Bankers and Pennine?

A: The case of Pennine is similar to Bankers in that PNN already has a TSX-Venture listing, but the main difference is that Pennine would look to an AIM listing to raise the initial development capital.

The challenge we have is to convince investors that Albania doesn’t have the same risks associated with other AIM oil companies operating in similar developing economies.

As we’ve already seen, the Albanian government is keenly engaged and motivated to capitalize on the country’s energy potential. As you’ll recall, Prime Minister Rama said in a public speech a couple of months ago: “This is our major goal—to pave the way for this impact. We are rightly happy and hopeful for the future of the oil and gas sector in our country.”