The LSE is establishing a new service aimed at helping smaller quoted companies to improve investor understanding and promote liquidity. John Cowie reports.
PSQ Analytics, a new equity research facility from the LSE, will be available to companies on Aim, as well as smaller companies on the Main Market. The new service, expected to launch fully in the autumn, is part of the LSE's drive to boost liquidity in the shares of smaller companies.
Welcome initiative
Smith & Williamson held a number of business breakfasts last year in conjunction with the LSE, where we invited Aim company directors to discuss matters of concern to them. The issue of liquidity was a recurrent theme, so this equity research venture is clearly a step in the right direction.
Three research providers – Argus Research based in New York, Independent International Investment Research plc based in the UK, and Pipal Research in Chicago – will work together to produce standardised, high-quality, cost-effective equity research in accordance with an agreed template. The three providers all have a strong track record of providing objective research across a wide variety of sectors.
Companies electing to adopt the research coverage will be allocated equally and on a pre-determined blind pool basis between the three firms working under the PSQ Analytics umbrella.
Reaching potential investors
The research will be distributed, free of charge, to a wide audience, through Bloomberg, Thomson Reuters and a dedicated web portal.
Announcing the launch of the new service, Martin Graham, head of Aim and director of equity markets, said: "Smaller companies are competing to attract investor interest. Equity research is a key tool to allow them to get their message heard. The market feedback we have received demonstrates that there is huge value for companies in this scheme. By paying for research to complement the services already provided by brokers and other research firms, companies can increase visibility and understanding of their stock, leading to a wider investor base and ultimately enhanced liquidity."
Smith & Williamson's 2007 Aim Survey of UK-listed Aim companies found that fewer than one in five felt that there was a buoyant market in their shares. We, and surely the Aim community as a whole, will welcome the greater transparency this initiative should create.
Consultation on further measures
The LSE also plans to consult member firms on other measures it could take to improve price formulation and liquidity provision for smaller companies. Under consideration are changes to marketmaking obligations, the costs associated with market-maker registration, as well as the reduction and possible removal of reporting fees in less liquid equity securities. Watch this space.
For more information about PSQ Analytics, speak to us or visit the LSE's website: www.londonstockexchange.com
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