Publications that covered this story include: the FT and CityAM on 29 July 2019.
- Reflects increasing attractiveness of AIM to companies
- Average market cap of AIM companies has increased four-fold since 2008
- Only one company moved to another exchange last year
The number of companies delisting from the Alternative Investment Market (AIM) fell to its lowest level in over a decade last year, our research shows.
Just 66 companies delisted last year (year-end 30th June), down from 82 in 2017/18 and 275 ten years ago (see graph below).
The falling number of delistings reflects improvements to a variety of different aspects of AIM which has made being listed on the exchange more attractive; for example:
- Right balance of regulation: Only six companies delisted last year citing AIM’s regulatory obligations being too much of a cost or time burden, down from 47 ten years ago (2008-09)
- High levels of liquidity: Average daily volume of trades on AIM’s secondary market reached 44,360 in 2018, up from 15,180 in 2008. The average value of trades per day increased to £1.9bn from £468m
- Improved profitability of companies on the AIM market has attracted more institutional investors: Just one company delisted last year citing a weak financial position, down from 21 ten years ago (2008-09)
It is significant that just one company delisted from AIM to move to another exchange last year (see below) compared to four in the previous year.
Having the right balance of regulation is essential as it ensures good practice amongst companies and maintains standards, whilst not stifling growth.
High levels of liquidity is also considered important by companies because it means shares can be bought and sold with less impact on price. A narrow bid-ask spread helps to encourage investment as investors are feeling more comfortable in building up or exiting a stake.
AIM’s success ultimately stems from its ability to enable companies to raise long term capital efficiently from an increasingly wide range of institutional investors, which helps support rapid growth. Over the last decade the average market capitalization on AIM has increased nearly four-fold to £98.9m in 2018, up from £24.3m in 2008.
Laurence Sacker, Managing Partner in our London office, says: “Delistings continue their long-term decline as the improved quality of AIM’s offering means more companies stay put.”
“Companies are increasingly seeing the cost of listing as worthwhile to access the deep pools of secondary capital AIM offers a route to. As the market has grown, so has its reach to institutional investors and this ability to meet funding needs reduces the need to move.”
“Tough economic conditions and more robust market requirements have led to weaker companies leaving the market, and better-run companies surviving and growing.”