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IPO drought taints otherwise decent performance by AIM in 2009

15 January 2010

New analysis of the performance of the Alternative Investment Market (AIM) during 2009 has confirmed widely acknowledged views that while the lack of new listings was a disappointment, the soaring value of stocks and the ready access to secondary capital were a triumph for many companies.

According to figures by business advisory firm Deloitte, AIM admissions dropped to their lowest level in over a decade last year, with just 36 new entrants to the market compared with 114 in 2008; previously the lowest was 75 in 1998.

Richard Thornhill, capital markets director at Deloitte, says that although 2008 proved the crunch point for the economy, the repercussions were felt in 2009. “Since the number of companies on AIM peaked in 2007 there has been a steady stream of companies de-listing from the market,” he said.

“The reasons for this are twofold; either the underlying business has suffered through problems in the wider economy, or the management team has decided that their listing is not giving them value for money, and therefore de-list as a cost cutting exercise.”

Thornhill said the trend had continued throughout 2009, with 293 companies de-listing compared with 258 during 2008. This left the total number of companies on AIM at 1,293 at December 31, 2009 compared with 1549 at the end of 2008, a net fall of 17% in the year, and a fall of 24% or 401 companies compared to the peak in the market at the end of 2007.

Thornhill continued: “In terms of giving fast growing companies easy access to the public markets, AIM’s primary purpose, 2009 has been the worst year for the market so far. However, for the majority of companies that have remained in the market, and their investors, it has been a different story.”

He noted that the overall value of the AIM market had risen significantly during the course of the year, with the all-share index soaring from 394 to 654, up 66%. This compares very favourably with the FTSE main market all-share measure which rose by just 25% over the same period. This is reflected in the spread of market capitalisations across the AIM market and the number of larger companies by this measure. At December 2008 there were only 77 companies with a market capitalisation greater than £100m. This had almost doubled to 147 at the end of December 2009.

Thornhill continued: “The AIM market has continued to provide access to further funds for already listed companies, with fundraising in 2009 reaching £4.8bn, almost 150% of the total in 2008, which totalled £3.2bn.

“For those companies which see AIM as a stepping stone to bigger things, 2009 saw a continuation of companies completing a ‘move-up’ to the main market, with nine having completed this in the year, the same amount as in the full year 2008.”

The conclusion of the Deloitte research is that 2009 demonstrated two conflicting stories. “Those companies that are already listed have benefitted from ready access to further funds, improving share prices and the continuing opportunity to move up to the main market,” Thornhill said.

“In contrast, accessing AIM as a new company has been more difficult than at any time since the inception of the market. This is likely to continue, and those companies with higher risk profiles, such as previously unproven technology or business models will continue to struggle.”