AIM recovery hits the buffer as number of companies leaving market rises

  • Average amount of money raised in IPOs shrinks to £3.6 million
  • But number of new listings bounces back

The recovery of the AIM market has been knocked off course for a second quarter in a row as the number of companies delisting jumped 50% in Q2 2011 and the money raised in AIM IPOs fell, reveals our latest research.

42 companies left AIM in Q2 2011, up from 28 in Q1 2011. UHY Hacker Young points out that this is the largest quarterly increase in the number of companies leaving AIM since Q4 2009, during recession. (See table below)

The average amount of new money raised per AIM IPOs has fallen to approximately£3.6m in the first part of this year (five months to May 31st 2011). This is down 70% from the average £12m in new money raised per IPO over the same period in 2010.

The appetite for new IPOs amongst investors has dropped off in the last six months, as the Eurozone crisis and rising oil prices have buffeted investor confidence.

Tellingly, the ability of AIM companies to raise money in the secondary markets has suffered as well, with a five companies saying they are leaving AIM after struggling to raise money through secondary issues.

Total money raised through IPOs to the end of May is down overall from £328 million in 2010, to just £91 million this year.

Laurence Sacker, corporate finance partner in our London office, comments: “The sheer size of AIM means that you can’t expect AIM to be immune from the big trends in the global economy. AIM is not a sleepy backwater anymore. If the Eurozone is in crisis or the UK economy is stagnating because of Government cost cutting then that is going to impact the fortunes of AIM listed companies.”

“AIM had built up a real head of steam towards the end of 2010. It would be a shame to see its recovery fizzle out so prematurely.”

AIM has also seen a slight rise in the number of companies leaving AIM as a result of financial stress and insolvency, up 29% year-on-year, from 17 in the first half of 2010 to 22 over the same period this year.

Still hope for AIM as number of new listings more than doubles

A jump in the number of new AIM listings offers some hope that the market could get back on the road to recovery.

The number of companies joining AIM more than doubled to 16 in Q2 2011, up from just seven in the first quarter. New listings are also up 23%, year-on-year, from 13 in Q2 2010.

Laurence explains: “Despite its struggles, AIM remains an attractive prospect for many young firms.”

In another positive sign for AIM, the number of companies graduating from AIM to the Main Market of the London Stock Exchange is at its highest level since Q2 2008. Five companies left AIM for the Main market in Q2 2011.

Similarly, the number of companies leaving as result of M&A activity is on the rise, with 13 companies leaving due to M&A (excluding reverse takeovers) in Q2 2011, up from 10 in Q1 2011.

“Losing companies because they have graduated to the Main Market, or due to M&A activity is a sign that a market is healthy.”

“It shows that companies joining AIM have confidence that the market will allow them to grow and take their businesses on to the next stage in their development.”

Increase in companies leaving AIM

Reasons for delisting from AIM Apr 10 –
Jun 10
Jul 10 –
Sep 10
Oct 10 –
Dec 10
Jan 11 –
Mar 11
Apr 11 –
Jun 11
AIM too expensive / too much of a burden 3 7 3 6 4
Change of listing to other exchange 6 5 2 1 6
Failure of strategy/ Low share price and/or liquidity 6 5 2 1 5
Financial stress & insolvency 7 8 8 10 12
M&A 12 20 16 10 13
No NOMAD 1 0 1 0 2
Total 36 45 32 28 42
Total leaving for negative reasons* 20 22 14 18 24
Listings 13 16 23 7 16

 

*Excluding M&A and graduation to Main Market