AIM delistings increase again

Titles that covered this article include: The Daily Mail 4 January 2010, The Daily Telegraph 4 January 2010, The Independent 4 January 2010 and The Financial Times 5 January 2010.

  • But delistings due to takeovers up in Q4 09
  • Delistings due to financial stress down but still high

The number of companies delisting from AIM has risen in Q4 09 to 73 companies from 63 in the previous quarter reveals research from UHY Hacker Young and Trowers & Hamlins LLP, the City law firm.

This increase reverses the gradual fall in delistings throughout 2009.

However, UHY Hacker Young and Trowers & Hamlins say the unexpected jump in delistings has been driven by the number of AIM companies being taken over. 23 (32%) of the delistings were due to the AIM company being taken over in Q4 versus 13 takeovers in Q3 09. Takeover activity became the leading reason for delisting from AIM in Q4 09.

22 companies had to delist in Q4 09 because of insolvency or financial stress down from 27 in Q3. However, the figure is still over double the amount that cited insolvency or financial stress as their reason for delisting a year ago (Q4 08).

Charles Wilson, Partner at Trowers & Hamlins comments: “The increase in delistings this quarter is not wholly bad news for AIM because so many of the cancellations have been driven by takeover activity.”

“Some of the more recent takeovers of AIM companies have been launched by management or by majority shareholders – it is a positive sign when insiders are willing to initiate takeovers of AIM companies they are involved in.”

However, UHY Hacker Young and Trowers & Hamlins says there has been a worrying bounce in the number of companies citing the costs of an AIM listing as their reason for delisting up from 6 in Q3 to 14 in Q4.

Says Laurence Sacker, Partner at UHY Hacker Young says: “AIM is clearly not out of the woods just yet and these figures show its recovery is still quite mixed.”

“Sentiment about AIM has improved considerably over the last year but unfortunately investors should expect that many more AIM companies will become insolvent before the UK economy returns to its pre-recession size.”

“There are still a lot of walking wounded out there.”

A total of 498 companies have now delisted from AIM in the last two years (280 in the last 12 months).

Number of delistings due to takeover activity*

AIM-2010-takeover-activity

*Does not include reverse takeovers

Number of delistings due to financial stress & insolvency

AIM-2010-financial-stress

Just two companies delisting in Q4 due to lack of NOMAD

The research by Trowers & Hamlins and UHY Hacker Young also reveals that only two companies delisted from AIM in Q4 2009 (versus 22 in Q4 08) because of the resignation of their Nominated Advisor (NOMAD). AIM rules state all companies must retain a NOMAD at all times.

Laurence Sacker comments: “This time last year NOMADs shed clients they no longer saw as profitable, and in other cases the banking crisis saw the collapse of some NOMADs which left AIM listed companies adrift.”

“This was a real problem for investors in AIM listed companies as the price investors can get for their shares following a delisting can be dramatically lower.”

“Thankfully for companies and investors these instances now appear to have all but dried up.”

Number of companies listing on AIM rises slightly

Lending weight to the gradual rehabilitation of AIM Q4 saw 17 companies were admitted to AIM in Q4 09 (excluding readmissions), the highest quarterly total since Q2 08 but still significantly down on the 56 that joined in Q4 07.

Charles Wilson comments: “Admissions to AIM came to a standstill as the banking crisis forced investors into a flight to safety.”

“However the gap between the number of companies listing and delisting on AIM is still large. Confidence in AIM IPOs is still a little brittle so NOMADs are going to be quite selective about the companies they try to raise money for.”

Reasons for de-listing Q4 2008 Q3 2009 Q4 2009
Number % of total Number % of total Number % of total
AIM too expensive /
too much of a burden
7 10% 6 10% 14 19%
Change of listing to
other exchange
2 3% 3 5% 2 3%
Failure of strategy 7 10% 8 13% 9 12%
Financial stress & insolvency 9 13% 27 43% 22 30%
M&A 16 23% 13 21% 23 32%
No NOMAD 22 31% 5 8% 2 3%
Other 8 11% 1 2% 1 1%
Total 71 100% 63 100% 73 100%