What is a UK listed small cap?

The oft-bandied phrase ‘small cap’ is used to cover a diverse spread of UK listed smaller quoted companies, including penny shares. The industry classification of a penny share is one with a market cap of less than £100 million and/or a share price of less than £1 with a bid/offer spread greater than 10%. (Don’t worry if you don’t understand these terms, you can view a glossary by clicking here).

The majority of the companies featured on pennysharesonline are listed on AIM , with some quoted on the official list. AIM has provided a successful platform through which smaller companies can raise funds. "Since its launch in 1995, over 2,500 companies have joined AIM − raising more than £34bn in the process, both through initial public offerings (IPOs) and further capital raisings." (Source www.londonstockexchange.com January 2008)

It has been argued that smaller companies do not usually have the financial strength enjoyed by the weightier stocks, thus making them more vulnerable to commercial setbacks and economic downturns. However, we need to bear in mind that ‘minnows’ are able to adapt themselves rapidly in response to changing conditions, which may lead them to outperform their larger cousins. This is a fact sometimes overlooked in the mainstream media.

Having decided to consider the small cap sector, the overriding factor has to be having access to the right information, which, in the case of the small cap sector, is both sparse and difficult to come by……one of the prime reasons we put this site together! We believe that the best place to start your research into a small cap company should be our members area.