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Article
researched and written for Fill ya Boots!
by
Les Fearn
Fill ya Boots! generally
concentrates on companies that are listed either on the main market or AIM, but
as many regular visitors will know, there are also opportunities to be had
on OFEX. Those in the limelight
over the past year have included Monticello (up over 2000%) and Knowledge
Management Software (up over 700%); and in this month’s e-mail to users (March
2000), we are tipping MAXIMUSIC.COM.
If you are interested in
learning more about OFEX (its history, the risks, finding a stockbroker) and
some of the ‘gems’ it has unearthed recently, read on……..
What is OFEX?
The OFEX exchange is simply
a trading facility that enables LSE member firms to deal in unlisted and
unquoted companies not found on the London Stock Exchange, and as a result, not
subject to its complex rules. JP
Jenkins Limited operates the business, and as such, is also the principal market
maker. The company receives
applications from businesses wishing to use its facility to trade their shares.
Companies use OFEX for many
reasons – new companies use it to raise much needed capital, some as a public
way of valuing their shares for future acquisitions, and some, merely for the
open market to decide on the true value of its business. Whilst many commentators in the media state that it is a
“market” (like AIM and the main index), technically this is not the case –
it is only a dealing facility for smaller UK businesses; it is NOT a recognised
Investment Exchange.
OFEX History
Given the fact this
“unquoted” share market only started four and a half years ago, it is
incredible that it now has a market capitalisation of £4.5billion, and lists
over 200 companies. From its
beginning on 2nd October 1995, it is now seen by many penny-share
investors as the place to be to make quick money (if that is the right phrase),
but the risks are also very high.
John Peter Jenkins is the
person behind the business – who himself started in the stock-broking world at
the young age of 15, following in his fathers footsteps. By the early 1990’s, he began dealing in smaller company
shares as a market maker. Realising
how difficult it was for small businesses to list on any exchange without the
necessary money and tight regulations, he launched OFEX as a platform to dealing
in these unquoted shares, initially with 45 companies.
The Risks
“There’s no gain
without pain” is a phrase commonly used in the world of finance, but if you
intend to deal on OFEX, it could be quite appropriate – the shares can be VERY
RISKY, with high gains if you do your research well, and choose the right stock.
Generally, all shares traded on OFEX should be viewed as high risk, and
like any of the tips we give here at
Fill ya Boots!, only use money you can afford to lose, or you could be in
real “pain” if it goes wrong.
Investors should bear in
mind that JP Jenkins can at any time suspend and / or withdraw the OFEX facility
at its own discretion; and similarly, individual company’s can ask that their
own shares be suspended / withdrawn. Whilst
an announcement will usually be made at that time, this is not always
guaranteed. Shares that are
withdrawn basically means that JP Jenkins will no longer deal in the shares of
the company, and the security could be withdrawn immediately.
Like all other markets, JP
Jenkins reviews transactions that are made throughout the day, ensuring that no
suspicious or irregular trading occurs that may prevent an ‘orderly’ market.
Views of the City
Whilst
the principles of OFEX are obvious for the companies involved (it can be a
lifeline for some), many city institutions perceive the market as a place for
poor, sometimes worthless businesses – a little harsh maybe.
However, as regulation is less strict on joining OFEX than it would be on
the main exchanges, it is imperative that every investor undertakes thorough
research, and keeps a close eye on their stock.
Buying Shares on
OFEX
Not every stockbroker will
deal in companies listed on OFEX, mainly due to the high risk involved and the
time it can take to finalise transactions for you.
Certainly HSBC stockbrokers, DLJ Direct and Hargreaves Lansdown do not,
nor, as far as we are aware, do they intend to in the immediate future.
If you are interested in
buying into any of the 200+ companies available through OFEX though, the
stockbrokers* listed below should be able to help you further:
·
Barclays
Stockbrokers
(0845) 609 0039
·
City
Share Shop
(0800) 496 2496
·
Redmayne
& Bentley
(020) 7489 9955
*
For more information about choosing a stockbroker, click here
for the Fill
ya Boots! Guide
to Stockbroker’s
Trading hours of JP Jenkins
are the same as for AIM and the main markets: 8:00am to 4:30pm Monday –
Friday.
The OFEX Website
To
access the official OFEX web site click here
or click the link from the Fill ya Boots! navigation bar to the left.
Good Luck !
Article
researched and written for Fill ya Boots!
by
Les Fearn
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