SUNDAY BUSINESS

10th October 1999

When is a market not a market? When it is Techmark, billed as the Stock Exchange's long-overdue response to New York's Nasdaq and Frankfurt's Neuer Market.

The exchange has won plaudits from the City for its decision to create Techmark, which will begin trading next month. Small technology-based firms have long complained that they have difficulty raising funds for expansion because they cannot float without a three year trading record.

Techmark will allow them to obtain a listing. Entrants will need a market capitalisation of at least £50m and will be required to sell at least £20m of new or existing shares when they float. They will also have to provide quarterly financial reports.

"Techmark is a long-overdue recognition that these companies are growing faster than most and need access to capital", says Andy Middleton, UK managing director of Alpha Telecom, a private firm which plans to float next year. "After all, if Nasdaq hadn't existed, the likes of eBay, Exchange Holdings and Amazon.com would never have been able to float."

In the absence of a British version, some firms have listed on Nasdaq, or floated on the Neuer Market. "The way things were, we probably would have listed on Nasdaq," Middleton says. "It means flying over to New York on a regular basis. You go over and do your roadshow over there, which does not make sense. But it works because you do not feel like you are having to educate your audience."

But, despite its name, Techmark is not a market in its own right. As Middleton points out, it is simply "a short-cut to the main market" for firms that would otherwise not be allowed to float.

Techmark will initially consist of some 170 companies that are already quoted on the main market. Those listed on Techmark when it launches next month will keep their existing listings on the main market, while new Techmark entrants will automatically get a full listing on the Stock Exchange.

So why doesn't the exchange just make it easier to list on the main market and have done with it? After all, it bent the rules to allow Freeserve to obtain a full listing without a three year trading record. The Stock Exchange argues that by bunching small technology-based companies under the Techmark banner - along with their more established counterparts - it will increase the profile of the sector and make it easier for them to raise funds.

Much will depend on how fund managers respond to the idea, but initial signs are encouraging. Close Brothers has already set up a tracker fund which will be based on Techmark.

Exactly what constitutes a "technology-based" company is not completely clear. According to the Stock Exchange, any firm with "a reliance on technological innovation" will be able to list on Techmark. All computer services, hardware and software companies will qualify automatically. So, too, will internet, semi-conductor and telecom firms.

But firms listed under aerospace, defence, electrical equipment, pharmaceuticals and even medical equipment & supplies may also be eligible. The Stock Exchange has appointed an "independent panel of technology advisers" to assess each firm.

Software company, Easyscreen announced earlier this month that it will be one of the first firms to list. According to Boyd Mulvey, of KPMG Corporate Finance, which is advising the firm, "Techmark is essential if London is going to hold on to its position in Europe as the primary place to raise money. Internet service providers and telecoms companies all want to hit the market and Europe has been very slow in catching up."

Mulvey says that if Techmark did not exist, Easyscreen would probably have floated on the Alternative Investment Market. But, more than three years after it was launched, many institutions remain reluctant to take stakes in Aim-listed firms.

Its many critics argue that if it had worked as it was intended to, there would be no need now for a Techmark.