Transitory environment for AIM

JUNIOR stock market AIM is continuing to experience low levels of activity and few new entrants, according to research.

A study by business advisory firm Deloitte shows that the total number of companies on AIM is likely to reduce over time – a trend that is set to continue until economic recovery.

Roger Esler, corporate finance partner in Deloitte’s Leeds office, said that the real activity on AIM in now in the secondary issue market.

“The City, averse to financial risk deriving from borrowings being close to facility limits and any threat of covenant breaches, is impacting valuations dramatically,” he said.

“We expect the reorientation of capital structures towards equity to continue and the discounting on secondary issues to be higher for de-leverage stories than for growth strategies.”

Despite the downturn the debut of Max Property Group injected hope into the market.

The company raise £220m on AIM back in May representing the largest fund-raising by a new admission since November 2007.

However, Mr Esler said that only a further £3m in new money had been raised by seven other companies floating on AIM.

“Without this single Initial Placement Offering (IPO) the quarter would have equalled the lows of quarter one, which itself was the least amount of money raised for over a decade,” he continued.

“There were eight new issues in the quarter, comparing favourably with the five in the first quarter of the year but is still well down on the 37 new admissions in the same quarter in 2008.”