This article was first published earlier this year on the Blackthorn Focus website.

Followers of the UK smallcap markets understand normal market conditions here are so rare they are abnormal. Each year, the summer months are blighted by a shortage of liquidity and the entire sector oversells with much great frequency than the bluechips. Smallcaps are either overhyped, oversold or somewhere between the two and it is more common investor attitudes reside at one of the extremes than the healthier medium.

David O'Hara: The last two years have seen more damage done to smallcap valuations and liquidity than any period in ten years. The difficulties at this end of the market have hurt investors, companies and vital intermediaries such as brokers and the exchanges. To qualify the extent of these difficulties and draw out potential remedies, Blackthorn Focus assembled a panel of expert smallcap market practitioners in a roundtable discussion. Highlighted issues included the impact of both national and European regulation, the role of retail investors and the value of broker/independent research. We are delighted to bring you the proceedings of that discussion here. I hope this debate enhances understanding among all of us participating in the market and encourages future collaboration and cooperation.Finally, thank you to all our expert panelists, particulary BDO’s Chris Searle for hosting the discussion.

Chris Searle, Discussion Chair: AIM was disproportionately hit by the financial crisis. Has interaction with the financial markets become tougher for smallcap companies?

Andrew Tan: We listed in August 2006, during more buoyant times for the market. At the time of IPO we did not raise any new money but in 2007 we did two separate fundraisings. The process was extremely simple and valuations were favourable. This was great as we did not need to raise money in 2008, a really tough time in the market. For the 2007 fundraisings we already had institutional interest in the company and we just issued the shares. Less demands were made on management time through discussions with lawyers, brokers or roadshows. At the beginning of 2009 we raised £10 million. This was harder work and hugely timeconsuming from a management perspective. At the end of 2007 we raised funds at 280p, in May 2009 we got funds at 120p. It was much tougher, institutional shareholders were more questioning, the tone was…

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