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GAME Digital (LON:GMD)

  • Share price: 23.8p (-5%)
  • No. of shares: 173 million
  • Market cap: £41 million

Proposed admission to trading on AIM

A couple of readers have asked me about GAME Digital (LON:GMD) 's proposed move to AIM from the Main Market. This was announced yesterday, prompting a 5% fall in the share price.

The shares are down by another 5% today, hinting at a delayed reaction to the news from some shareholders.

Let's consider the pros and cons.

Pros

  • Saving costs. Comments by BDO in 2015 (PDF) suggested that an AIM listing was £150k/year cheaper than the main market. For a company with a market cap of £40 million, it is sensible to make that kind of saving. In general, companies of that size will find that AIM is more appropriate for them.
  • Saving time. On top of the external costs, there are also internal costs to satisfy the more complex corporate governance requirements of a main-market listing. Life will be simpler and easier for Game on AIM.

Cons

  • Weaker governance. Some current or prospective shareholders might be unable or unwilling to hold a company listed on AIM, due to the weaker corporate governance requirements. This is hardly going to apply to Mike Ashley (£SPD) or Miton (LON:MGR), though, who are the top two shareholders.
  • Signals a lack of ambition? I'm not sure if this is fair criticism, but perhaps the proposed move can be interpreted as a sign that management do not think that their shares are materially undervalued. That they have no ambition to appeal to mainstream and larger investors in the future. That they are content to save a little bit of money in the short-term, and don't expect to return the company to anything like its previous valuation.

My view

Personally, I would view it as a positive that Game is moving to the junior market, from a cost saving point of view.

The negatives wouldn't bother me, as I think that the corporate governance requirements on AIM are adequate for a company of Game's size.

So rather…

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