Following its merger with the London Stock Exchange in August 2007, Borsa Italiana (the Milan Stock Exchange) launched AIM Italia, the Italian market dedicated to small and medium companies with strong growth potential.
The structure and rules of AIM Italia are largely the same as AIM UK, reflecting the ambition of Borsa Italiana to replicate the success of AIM UK by offering a simple and flexible listing process to SMEs in Italy.
The absence of an easily accessible equity market has meant that, in the past, smaller companies in Italy have relied far more heavily on debt than equity to finance their growth. AIM Italia would therefore provide ambitious SMEs looking to realise their growth potential with a relatively quick and easy access to an equity market with a global recognition (through the ‘AIM’ brand).
So far, eight companies have listed on AIM Italia and 13 organisations have signed as Nomads– the nominated advisers acting as regulators for companies listed on, or coming to, the market. The listed companies operate in a variety of sectors ranging from manufacturing to real estate and marketing.
Borsa Italiana predicts a bright future for AIM Italia: another three companies are expected to float over the summer and over 300 businesses have recently enquired about floating on AIM Italia. It is estimated that in the Italian North-East regions alone, there are approximately 500 businesses with listing potential.
Some nomads and brokers in London have raised doubts about the merits of an offshore expansion of AIM, especially at a time when the number of companies on AIM is decreasing (the total number of listed companies fell to 1,293 in 2009, down from 1,550 in 2008).
One obvious concern is that the launch of AIM overseas may undermine the LSE’s efforts in establishing the London operations as the growth market of choice for SMEs worldwide (c40% of AIM companies have overseas operations). The Exchange is of the opinion that AIM Italia (and Tokyo AIM) will not cannibalise their parent’s market, but rather will provide more choice to foreign companies looking to find the most suitable market environment.
Despite the initial enthusiasm for AIM Italia, it is too early to say whether it will succeed. In fact, although the infrastructure is now fully in place, it will take time to build the ‘critical mass’ required to generate market liquidity which is key to attracting and maintaining institutional investors.
It will also take time for the necessary cultural changes to happen. Most Italian SMEs are family businesses whose control and management have been handed down in succession for decades. As such, the potential dilution of control associated with going public remains a key concern, with many families historically reluctant to allow non family members to hold shares.
The change in attitude towards market listing amongst Italian entrepreneurs will be the key to the long term success of AIM Italia; and Exchange and Borsa Italiana will undoubtedly need to play a key role in this ‘education process’.