Ten years on from credit crunch, AIM de-listing crisis finally comes to an end

Publications that covered this story include the Daily Mail on 23 July 2018.
  • 71% fall in companies quitting AIM in a decade
  • Suggests market shake-out complete

There has been a 71% fall in the number of companies quitting AIM over the last decade, suggesting that the de-listing crisis seen since the credit crunch has finally come to an end, our research shows.

AIM has gone through a purge of smaller, financially weaker companies over the last ten years. In 2017/18, 74 companies de-listed from the Alternative Investment Market (AIM), down from 257 in 2008/9.

There was an 82% decrease in companies de-listing due to financial stress or insolvency – down from 33 on 2008/9 to six in 2017/18.

The figures reflect significant improvement in the quality of companies listed on AIM in recent years.

It explains that the financial crisis and subsequent recession weeded out many of the least financially-sound companies on AIM, while rules setting out criteria for entry and governance requirements have been tightened.

The biggest decline in de-listings was among companies who said that being listed on AIM is too expensive. Ten years ago, 40 companies de-listed for that reason, compared to just one last year – a 98% drop.

This is likely to reflect not only the larger size of AIM-listed companies today and the resulting reduction in the significance of the listing costs, but also confirms the improvement in quality of the companies listed on AIM.

The biggest driver of de-listings over the past ten years was mergers and acquisitions (M&A), which fell by 56% from 62 to 27 last year.

Much of the high M&A activity post credit crunch involved vulnerable, poorly performing companies being bought up at extremely low valuations. Whereas now M&A is being undertaken more strategically, as robust, fast-growing companies are snapped up in order to add real value.

Market shake-out complete

Laurence Sacker, managing partner in our London office, comments: “A decade on from the credit crunch it seems that the market shake-out of AIM is complete.”

“The market is much leaner and heathier now than it was ten years ago, as a combination of tough economic conditions and more robust market requirements have separated the wheat from the chaff.”

“It’s now functioning better than ever as an effective and efficient platform for small company fundraising and growth.”

“Key to this success has been striking the right balance between keeping regulation light-touch enough to stimulate the market, while ensuring sufficient checks and balances are in place to raise standards among AIM companies.”

Changes to the AIM rules in 2018 include an early notification process for Nominated Advisers (NOMADs) to outline key information on proposed new entrants, and requiring AIM-listed companies to apply a recognised corporate governance code.

“The next step for AIM is to focus on growth. A lot of market participants would like to see an even more active marketing campaign to attract high quality UK and overseas companies to AIM.”

Total number of companies quitting AIM falls 71% in a decade

Number de-listing due to cost of listing falls 98% over 10 years…

…while de-listings due to financial stress or insolvency drop 82%