Sharp rise in cost of listing on AIM sparked by Eurozone fears

Publications that covered this article include City AM and The Financial Times, 10 April 2012.

  • 10.6 % reflects biggest cost increase in years
  • Global flight from risk sees listing costs put strain on fundraisings

The cost of listing on AIM has risen at its fastest rate in more than five years according to our findings.

AIM listing costs, including professional fees and all other associated costs, now stand at 10.6% of all funds raised, up from 7.3% in 2010.* (Full Results Below)

Investor uncertainty, spurred by the Eurozone crisis, has meant that many newly listed companies have struggled to raise finances through capital markets over the past year.

This means that a higher proportion of funds raised are being eaten up by AIM listing fees and broker charges.

New listings on AIM raised just over £518 million last year, down 47% from £959 million raised in 2010.

Laurence Sacker, partner at our London office, explains: “Capital markets worldwide are still reeling from the global flight from risk and AIM is no exception.”

“Many companies have reportedly struggled to raise funds through the markets as external factors, particularly the Eurozone crisis, have caused investors to shy away from equities in favour of more traditional assets.”

“The sheer fact that companies are still coming to list on AIM is a testament to the confidence investors have in AIMs long term stability. AIM will need to repay this confidence down the line, by bouncing back strongly from the economic slowdown.”

“Obviously, firms do not seek AIM listings solely to raise capital. Many companies will list on AIM to generate currency for future acquisitions, to provide a liquid market to allow their employees to buy and sell shares or to raise their profile.”

Despite struggling to raise money through IPOs, companies found AIMs secondary market remained positive, raising £3.7 billion in 2011.

Laurence says: “It is no secret that AIMs secondary fundraising market is still very active. AIM holds a great track record of helping companies to raise funds through further fundraisings post-IPO and has established itself amongst other junior markets because of this.”

The ever-tightening regulatory environment means that NOMADs are taking on significantly more risk when dealing with new AIM entrants. This has resulted in higher fees being charged to compensate for that risk.

In December 2011, AIM issued a record £400,000 fine against one of its leading NOMADs for breaching AIM rules, including drafting misleading company announcements and not undertaking necessary due diligence on the director of a company seeking admission to AIM.

Laurence comments: “With investor confidence already shaky, the last thing the Stock Exchange will want is a scandal where investors are left out to dry.”

Average costs of AIM IPO as a percentage of the funds raised – includes fees to London Stock Exchange and to professional advisers

Average Cost Graph

* Year to 1 January 2011.