AIM departures at lowest level since 2005-6

Publications that covered this story include The Independent and City AM, 01 October 2012.

  • Half of departures due to M&A
  • But total number of businesses listed on AIM falls to lowest level since 2003-4 as number of new IPOs falls

Only 102 businesses left AIM in 2011-12 (year end September 30), an 18% fall from a year ago and the lowest level since 2005-6.

In comparison, 278 businesses delisted from the market at the peak of the recession in 2008-9, over 17% of all companies then listed on AIM (see chart below). The number delisting in the last year is now 9% of all companies listed on AIM.

The slowing in departures from AIM shows that the market has weathered the worst of the Eurozone crisis.

Laurence Sacker, partner at our London office, comments: “These figures are good news for the market. AIM seems to have come through the worst of the financial crisis, and emerged leaner and fitter on the other side.”

However, the process of AIM shedding its weaker companies means that the total number of businesses listed on AIM is now at its lowest level since 2003-4. There were only 1,106 firms listed on AIM at the end of the third quarter of 2012, a 34% fall from the peak of 1,682 firms in Q3 2007.

Companies departing AIM as a percentage of all companies listed on AIM

02.10.12

Half of delistings due to M&A

48% of companies who left AIM in the last year did so because they had been taken over by another company.

The increasing proportion of M&A activity in the market is a sign of nascent recovery, after several tough years in which financial stress and insolvency were more common reasons for businesses delisting from AIM.

Laurence explains: “It’s a positive sign to see an increasing proportion of delisting being caused by M&A. It shows that acquirers see real value in AIM companies.”

“The sudden jump in delistings due to M&A is a really strong advert for the AIM market.  Many investors in AIM companies are ultimately hoping to exit their investment through a takeover, so seeing other AIM businesses attract buyers has a positive effect on the market as a whole.”

“It creates a virtuous circle, by helping the performance of AIM-based funds, and freeing up cash that can be reinvested into the market.”

Insolvency departures drop to lowest level for 5 years

Only 23 firms left AIM due to financial stress or insolvency in 2011-12, just 23% of the total. This was the lowest number since 2006-7. In 2008-9, at the peak of the financial crisis, 82 firms delisted due to financial stress or insolvency. (See table below)

Business departures from AIM due to financial stress or insolvency

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Laurence comments: “It seems that most of AIM’s weaker companies have already been ‘weeded out’ by the tougher economy, and the remaining businesses are relatively robust. There doesn’t seem to be any sign of a ‘double dip’ in the market, as insolvency delistings continue their downward trend.”

Low demand for IPOs hits new AIM listings

The relatively good news in delistings was tempered by a fall in new listings on AIM. There were only 36 new listings in 2011-12, a 42% fall from 62 in 2010-11, and a 74% fall from a pre-recession figure of 138 in 2006-7.

Similarly, money raised through both new and further issues are down significantly; money raised through new listings has slumped 51% from £432 million to £211 million this year, while further issues fell 38% from £2.8 billion to £1.7 billion.*

Since AIM is a global market, which attracts businesses from around the world, soft global demand for IPOs has impacted the number of new AIM listings.

Laurence says: “The number of IPOs is driven by investor sentiment, so there is likely to be a significant number of businesses who have had to put off listing on AIM until investor confidence improves. Until investors’ risk appetite recovers further, the number of new listings is likely to remain relatively low.”

2006-2007

2007-2008

2008-2009

2009-2010

2010-2011

2011-2012

AIM too expensive/too much of a burden

9

18

43

28

14

7

Change of listing to other exchange

11

18

12

16

11

8

Failure of strategy

41

13

22

25

12

12

Financial stress & insolvency

17

26

82

47

34

23

M&A

63

76

49

76

48

49

No NOMAD

20

34

59

4

4

3

Other

15

8

11

3

1

0

Total

176

193

278

199

124

102

New listings (IPOs)

138

81

5

33

62

36

Number of companies on AIM (end Q3)

1682

1609

1353

1204

1156

1106

*Money raised in the 8 months to the end of August