Financial stress among AIM-listed companies falls to record low

Publications featured in include: Investors Chronicle

Financial stress among AIM-listed companies has fallen to a record low, with just three AIM companies going insolvent in the year to March 31 2022. The number of insolvencies fell from six in the previous year and a high of 48 in 2009/10, our research shows. 

The immediate fallout from the last credit crunch saw 16 times as many AIM companies go insolvent as in the past year. One of the reasons for this is that investors are now much more willing to back secondary fundraisings by AIM companies, meaning that they can survive short-term disruption to cash flow.

During the COVID crisis, many AIM companies confounded commentators with the ease with which they were able to raise additional funds to reinforce their balance sheets. In the first half of 2020 alone, AIM companies raised £2.8bn in new capital.

The firm says that the lack of insolvencies among AIM companies is a particularly positive development given the UK’s spiralling inflation and interest rate rises. Economic disruption of this kind is often expected to impact smaller listed businesses first – something that has not yet happened to AIM companies.

Peter Kubik, Partner in our London office says: “Just three AIM companies going under in the past year shows how robust the junior market has become.”

“The comparison with the last major economic crisis could not be more stark. The credit crunch saw huge numbers of AIM companies go insolvent. Over the last two years, AIM has acted as an excellent platform for businesses to raise money and thrive.”

The figures also demonstrate the London Stock Exchange’s success in improving the quality of companies listed on AIM. In particular the LSE has made particular efforts over recent years to ensure that Nominated Advisors - who act as AIM’s ‘first line of defence’ for regulation – are conducting thorough due diligence required of them.

Peter Kubik says: “AIM has become a very successful part of the UK’s capital markets in recent times. Improvements in regulatory oversight have sharply improved the quality of companies listed on AIM and investors have responded by backing them.”

Number of AIM companies delisting due to insolvency

AIM insolvencies May 2022 graph
* Year end 31 March 2022.

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