Cavendish Asset Management, which runs the only AIM OEIC in the market, has reviewed the AIM market for 2014. Peter Renton, Equity Analyst at Cavendish comments,
The past year has been a tremendous success for the IPO market on AIM, with 79 new companies floated on the exchange during the year – the highest number of IPOs since 2007, and 30% more than in 2013.
That’s according to Cavendish Asset Management, which runs the only AIM OEIC and has reviewed the AIM market for 2014.
Peter Renton, Equity Analyst at Cavendish, says: “More than GBP2.6 billion in new capital was raised by companies during 2014, doubling the prior year’s levels. IPO activity reached a crescendo in December, with 12 new companies rushing to join AIM before the markets closed for the festive season.”
Renton notes that the performance of the companies floating was also generally very strong. AIM IPO prices rose by an average of 12% on their first day of trading, and had maintained that gain 30 days later. The decline in the overall AIM market throughout 2014 inevitably led to these companies giving up some of their initial gains, but on average the IPO stocks remained up 8% for the year. This is especially impressive considering that the FTSE AIM All Share Index fell by 17% in 2014.
Further analysis shows that this strong performance masks considerable variability in the returns, with as many IPOs seeing their share prices rise by more than 50%, as those seeing theirs fall by more than 50%.
For example, the standout ‘winner’ for the year was 4D Pharma, a biotech venture, which gained 335% as investors were excited by its progress in the emerging field of live biotherapeutics. Less successful was Bagir, a suit maker, which sunk 82% after it announced just a month after floating that it had lost a contract to supply its main customer M&S.
Renton says: “Although AIM undoubtedly still attracts some fairly speculative stocks, those with questionable long term prospects, last year’s IPOs arguably represent a new breed of more mature companies joining the junior market.
“Indeed, there has been a striking increase in the size of companies floating – the average IPO size in 2014 was around GBP100m, which is more than double the average over the previous decade.
“The largest AIM IPO of 2014 was Market Tech, which owns Camden Market and 11 acres of prime London land, and was valued at around GBP850m after raising GBP100m in new money.”
In addition, whereas AIM used to be seen as a feeder to the Main Market, last year there were nearly twice as many companies transferring from the Main Market onto AIM than the other way round.
Renton says: “The statistics suggest that investors are generally best served by favouring IPOs of the larger and more established companies over the smaller and less established ones.
“During 2014, the largest 50% of companies by market capitalisation at the time of floatation generated a 12% return for the year – three times that of the smallest 50%.”
