AIM’s woes continue reveals report
QUARTERLY analysis of the AIM market by business advisory firm Deloitte has shown next to no new activity in 2009 with quarter one showing new lows for total new money raised.
The report reveals that just £13m of new money was raised on the market in the final quarter of 2008, which itself was the lowest for a decade.
However, during the first quarter this fell again to just £3m in total. In the same quarter in 2008 more than £300m was raised on the AIM market by new companies.
Across the same periods the number of companies listing has fallen from 32 to five, and in the last 12 months there have been 87 listings in total compared with 519 in the 2005, the most active year on AIM.
According to Roger Esler, corporate finance partner at Deloitte’s Leeds office, the figures are particularly relevant to Yorkshire, where the majority of the region’s quoted companies are on AIM.
“Consistent with quarter four 2008, the new year has brought such low levels of new companies coming to AIM that to all intents and purposes the fundraising market for new companies on AIM does not exist,” he said.
“However, there remains more opportunity for select companies already on AIM to raise money if their proposition is compelling enough.
“Secondary fundraising totalled £563m in the quarter which compares well with the £307m raised in quarter four 2008. Larger plcs such as SIG have raised new equity capital and placings by smaller companies may become more prevalent.”
Mr Esler said that it remained difficult to foresee any change in the negative sentiment towards the junior stock markets until business performance stabilised and risk appetite returned.
“We expect that the coming months will see more delistings of very small companies which do not see value in maintaining their AIM listed status,” he continued.
“Plc’s with reasonably wide ownership including city institutions that are seeking to go private will need to provide some cash exit mechanism for non-management shareholders to get their support to delist, otherwise ordinary shareholders would simply be giving away liquidity.”
It’s not justing the number of new listings that are falling. Take privates are also being limited by weakness in trading performance and limited availability of debt and private equity finance.
According to Deloitte’s research 258 firms de-listed in the 12 months to December 30, 2008. The trend has continued into 2009 with a further 77 companies taking private in the first quarter of this year.
As a result the total number of companies listed on AIM has fallen from 1,694 as of December 31, 2007 to 1,478 as March 31, 2009 – a fall of 13%.
Metnor, Northern Recruitment Group and Omega International are local examples of delistings cited by Mr Esler, albeit achieved through three very different routes.
He said: “For companies that tick the boxes of quality, long term growth and affinity with public status, the public markets remain a longer term option. However, until investor appetite returns for smaller quoted companies other sources of growth capital may be more available.”
But there is some positive news in the form of an increased in the FTSE AIM ALL-share index, which after a long period of significant falls (the AIM market lost two-thirds of its value in 2008) has shown an increase of around 5% in the first quarter of 2009.
This compares with a fall of more than 10% in the FTSE main market all share.
“As for any market, the momentum and interest in AIM is partly driven by value expectations and if the bottom has now been reached and the coming months start to show a track record of increasing valuation this may eventually tempt more companies back towards the market,” said Mr Esler.
“Until then, there may be a window of opportunity for management teams of PLCs to seek funding to buy other shareholders out.”
