Private placements under threat

by Catherine Woods - Monday, 12th November 2007 -

The new chair of the Quoted Companies Alliance says the ever-increasing inability of companies to carry out private placings is a huge issue for entities trying to access capital.

“This is a concern as it is, at best, increasing the costs of and, at worst, blocking access to capital,” Donald Stewart says.

“The spectacular success of AIM in the past 12 years has been to provide smaller companies with an effective way of raising funds to expand their businesses.

“The more restrictions that are placed on the ways money can be raised, the more difficult and expensive it becomes to raise money.”

The trend away from private placings is being driven by European legislation such as the Prospectus Directive or the Markets in Financial Instruments Directive, Stewart says.

He claims the legislation is “founded on the basic belief that investors cannot be trusted to make decisions about how to spend their own money and must be protected against their own foolhardiness”.

Individual investors are primarily the target of this legislation and not investment firms. Stewart adds: “Not only does this discourage activities such as day trading, it also makes it very difficult for a culture of business angels to thrive.”

The QCA is a lobby group for smaller UK companies. Click here to read more about Stewart and the work of the QCA.

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