Sept. 11 (Bloomberg) -- Paul Turner decided to delist his recruitment company from London's Alternative Investment Market after realizing the only buyers in his third share sale were the three who already owned most of the stock.

``Every time we chose to raise money, it was the same major shareholders that wanted to participate,'' said Turner, 41, chief financial officer of BNB Recruitment Solutions Plc. The firm went private in February after trading on AIM for five years and reaching a peak value of $66 million.

``We recognized that we could be achieving the same in a delisted environment without all the costs,'' he said.

Turner's company is one of 116 that exited AIM in the first half of 2007, 35 percent more than a year earlier, according to figures on London Stock Exchange Group Plc's Web site. Net listings, or the number of new members minus those that left, plunged 85 percent to 22.

The number of delistings on AIM in the first half, excluding acquisitions, more than doubled, to 41 from 15 last year. Delistings at U.S. rival Nasdaq Stock Market Inc. on the same basis fell to 30 from 41, according to data provided by Nasdaq spokeswoman Silvia Davi.

AIM became Europe's largest exchange for smaller companies and startups over the past decade after its comparatively relaxed listing rules helped lure entrepreneurs that might otherwise have chosen Nasdaq. Now the junior market is showing signs of saturation, and more members are leaving.

``There's a good appetite for small-caps, but it's limited,'' said Patrick Evershed, who manages 180 million pounds ($362 million) of U.K. stocks at New Star Asset Management Ltd. in London. ``The supply of equity has tripled in the past couple of years, and the supply of investment hasn't been able to keep up.''

Rapid Growth

The FTSE AIM All Share Index's best performance this decade was in 2003, when it jumped 39 percent. Annual returns declined steadily after that, reaching just 0.8 percent in 2006.

AIM stocks have fared better this year. The index has climbed about 5 percent in 2007, even following this quarter's global equity rout. The FTSE 100 Index has fallen about 1 percent.

LSE created AIM in June 1995 to help businesses raise cash without the costs and regulatory hurdles of full market listings. Starting with just 10 members, it now has about 1,673 and a total market value of 108 billion pounds. They range from Ubet2win Plc, a U.K. bookmaker valued at 410,000 pounds, to Sibir Energy Plc, an oil company valued at 1.72 billion pounds.

Listing Requirements

The cost for admission is 4,535 pounds for a U.K.-domiciled business, and companies must pay another 4,535 pounds a year to maintain the listing. Advisory and legal expenses add hundreds of thousands of pounds in one-time expenses to that figure, said Dru Edmonstone, head of corporate broking at Seymour Pierce Ltd.

The increase in companies leaving AIM is probably a reflection of the market having attracted too many poor quality businesses, according to Evershed.

``As brokers tried to cash in, there was a deluge of companies that should never have been brought to the market,'' he said. ``That has damaged its reputation.''

AIM's listing requirements have drawn criticism from NYSE Group Inc., which bought Euronext NV this year to gain a foothold in Europe, and Nasdaq, which has tried and failed to buy LSE twice.

Members don't file financial reports, as they must do in the U.S. Instead, they appoint investment banks or brokerages as their ``nominated adviser,'' or nomad, to guarantee the accuracy of their records.

LSE established new rules this year, including requiring nomads to have ``knowledge'' of their client's industry and to conduct checks on company directors.

`Functioning Market'

AIM is a ``properly regulated and functioning market,'' and businesses shouldn't view it as a surefire path to riches without putting in some effort, according to Patrick Humphris, spokesman for the LSE.

``If a company wants to raise a significant amount of money, they need to work on investor relations,'' he said.

AIM still has a stronghold on the small-cap market in Europe. Its main regional rival, the NYSE's market for small and mid-sized companies in Europe called Alternext, has attracted 100 companies since its inception in May 2005.

Companies on AIM raised a record 15.7 billion pounds last year, about the same amount as the Nasdaq and more than major exchanges in Frankfurt, Tokyo, Toronto and Sydney, according to LSE's Web site. The total value of shares traded on AIM jumped 23 percent in 2006 to 58 billion pounds.

`What's the Point?'

``The whole purpose is to give investors the chance to invest in some really exciting companies that would otherwise not have come to market,'' said Adam Steiner, who manages 400 million pounds at SVG Capital Plc in London. ``AIM is supposed to be where companies have low liquidity.''

Even so, Turner decided it wasn't worth his while. BNB Recruitment moved to AIM from the LSE's main market in January 2002, and its shares dropped more than 50 percent in five years.

The company raised about 16 million pounds selling stock three times. Major shareholders Montelle Properties Ltd., Round Enterprises Ltd. and Xanthus Ltd. owned 76 percent of the shares at the time of delisting, about triple what they held at the start of 2001.

``You're going to constantly look to see if you're getting value for money,'' Turner said. ``If you're not getting any of the benefits from being listed and still paying all the fees, what's the point?''

To contact the reporter on this story: Scott Hamilton in London at shamilton8@bloomberg.net

Last Updated: September 10, 2007 19:52 EDT