General elections hit flow of AIM IPO fundraisings

Publications that covered this story include: The Times, The Independent and The Daily Express, 4 May 2015.
  • Our research confirms that AIM fundraisings suffer during the run-up to General Elections.

The average money raised per month through IPOs on AIM during an election year was £196.6 million, but that dipped to £144.9 million in the month preceding and the month of the election, according to our research. We also explain that the closer the election result, the bigger the dip in money raised on AIM (see chart below).

Comments Laurence Sacker, Partner: “The potential for volatility around election periods doesn’t help pricing, and these figures suggest that many issuers and their advisers simply avoid the months leading up to the election. That level of disruption is worrying.”

However, we add that issuers drawing most of their revenues from overseas may be less nervous about a pre-election IPO.

Of the 20 largest IPOs to float in the immediate run-up to a General Election, more than half had operations either mostly or wholly overseas.  We point out that investors will be less concerned about the potential for overseas companies’ earnings to be impacted by changes in UK Government policy and taxation.

Greater involvement in AIM from institutional investors should help reduce the impact of elections on the AIM IPO market.

Laurence adds: “Institutional investors have got the resources to factor political risks into their investment decision-making.  More institutional investment also means more analyst coverage, which is good for the market as a whole.”

“It’s absolutely right that AIM should continue its efforts to attract more institutions into the market – it should help reduce pre-election and other wobbles and help the market as a whole take a more considered long-term view.”

Year Average money raised per month Average money raised in April & May Percentage decrease Election outcome
2001 £36.2m £30.7m 15.2% Lab majority 167 seats
2005 £469.3m £364.4m 22.4% Lab majority 66 seats
2010 £84.3m £39.8m 52.8% Hung parliament

*1997 General Election excluded, due to relatively small size of AIM market.