The Alternative Investment Market (AIM) looks primed for a strong start to 2013 following a robust year in 2012, according to analysis by Deloitte, the business advisory firm.
To the end of November in 2012, there had been 65 admissions to AIM, London’s junior stock exchange.
Richard Thornhill, capital markets partner at Deloitte, says: “Although the number of admissions lags behind the comparative periods in 2010 and 2011, which saw 88 and 86, respectively, it demonstrates that there is still a consistent baseline of activity on AIM. If you look behind the numbers there are good reasons to be confident about the market in 2013.”
From its peak of 1,694 companies in 2007, each year AIM has seen a reduction in listed companies down to 1,094 at the end of November 2012. However, the rate of decline is slowing considerably year-on-year, with the fall in 2012 so far being just four per cent (49 companies). This is a considerably lower rate than in 2009, when the list was contracting at its fastest, and the number of companies reduced by 16 per cent (257) over the course of the year.
In comparison to these periods of steeper decline, the profile of those companies who left the list in 2012 is different and provides encouragement that the core objectives of the AIM market are being achieved. As at the end of November, of the 113 leavers in 2012, 41 were acquired, 17 were subject to reverse take-over and three transferred to the Main Market. Those companies which were acquired received an average premium of 53 per cent to their close price on the day prior to acquisition, with only three of the acquired companies being subject to a discount to their share price.
Thornhill says: “During the time of the financial crisis, in the period following the boom in AIM market IPOs, the principal reasons why companies were leaving the list were negative. Either they no longer perceived that the market offered them value from a cost benefit perspective, or the economic climate forced them to de-list. The situation in 2012 has been very different, with the driving force behind companies leaving the list being transactions which have consistently realised value for shareholders.”
The performance of the new joiners in 2012 has also been overwhelmingly positive. The 44 companies which raised funds on admission had on average, a closing share price on 30 November that was 26 per cent higher than their issue price.
Chinese and Hong Kong operations figured prominently with seven out of a total 65 admissions and also accounted for the largest new joiner to the market in 2012 – Chinese mining services group, Rare Earths Global. Mining and oil and gas companies dominate the composition of the AIM market by value, accounting for around 35 per cent of the total, which was also reflected in the admissions in the year with 24 companies joining from these sectors.
Thornhill adds: “Looking ahead to 2013, we expect that AIM will further feed off the recent positive newsflow coming out of the Main Market. Sentiment is key when it comes to IPO activity and we expect that a positive outlook for floats on the senior market, coupled with the recognition that AIM is once again a market which can drive shareholder returns, will lead to a more receptive environment for IPOs across the board.”
