New research by Capita Asset Services shows a dramatic uplift in the capital raised on London’s Alternative investment Market (AIM), with the amount generated by new listings and cash calls in 2014 at its highest level in four years.
Since AIM was established in June 1995, companies (excluding investment vehicles) have raised a collective GBP79.5bn, GBP31.0bn in initial public offerings, and GBP48.5bn in rights issues.
The market reached its zenith in 2007, when GBP14.1bn was raised through IPOs and cash calls. In fact, 44% of all capital raised via the market to date was raised in the midst of the boom years between 2005 and 2007.
While the level of cash raised has not matched the peak seen in the previous boom, it is in rude health as the UK’s growing companies benefit from economic growth. In 2014, the total amount raised stood at GBP5.2bn. This was up 52% compared to 2013, and the highest level since 2010. Of this, capital increases accounted for GBP2.7bn, a 5.2% rise compared to 2013. IPOs accounted for GBP2.5bn, the highest amount since 2007 – three times the amount raised in 2013 and more than the previous three years combined. At 79, the total number of IPOs was also the highest since 2007.
The resurgence of AIM activity looks set to continue throughout 2015 as an increasing number of the UK’s growing companies look to tap the markets. In February alone, there were 42 cash calls – 24% more than a year ago. GBP315m was raised by listed AIM companies in February, compared to GBP221m in February 2013 – an increase of 43%.
David Kilmartin, Business Development Director at Capita Asset Services, which provides a suite of advisory and administration services for growing companies, says: “AIM has sometimes been overlooked, and on occasion has struggled with volatility and liquidity. But as it approaches its 20th anniversary, the market’s importance to young and growing firms cannot be underestimated. It provides a vital mechanism for companies to access new capital for further growth, or to provide an exit strategy for founders and private equity investors.
“AIM is enjoying a new lease of life as UK economic strength underpins demand, especially in the consumer sector. In times of financial turbulence, the IPO market stalls, while cash calls increase as companies look to shore up their balance sheets. In times of growth, companies look to capitalise on strong markets to float, or tap investors for additional cash to invest. This is what we are currently seeing.
“The first two months of the year have started with a bang, and the market is set to see further demand as agile and fast-growing domestically orientated companies exploit the country’s economic resurgence. By the end of the month, we should see AIM break the GBP80bn barrier for capital raised.”
Financials have made the largest contribution to the total capital raised on AIM since its inception, responsible for GBP23.4bn in total – more than a quarter of all equity generated via cash calls and IPOs. The majority of this was raised in the boom years between 2004 and 2007 (GBP15.6bn). However, a further GBP3.5bn was generated between 2008 and 2011, as banks sought to tap the markets to shore up their balance sheets following the Credit Crunch. Commodities firms were the next biggest contributors, with basic materials firms raising GBP13.6bn since 1995, and oil and gas firms GBP11.7bn.
Consumer facing companies were beneficiaries of an improving UK economy in 2014, and were prominent on AIM as a result. Consumer services companies raised the largest amount of capital (GBP1.1bn), primarily through new listing as the likes of Boohoo and Patisserie Holdings joined the market. Consumer goods firms raised a further GBP213m. Financials have dominated the market in 2015 so far, raising GBP174m of the GBP471m generated in new and further issues.
AIM has seen far greater activity than the other markets on the London Stock Exchange. Since 1998, it has seen 1,777 new listings, compared to 561 on the international and main markets. Equally, it has seen four times the number of cash calls (8,573 compared to 2,188).
In 2014, this trend was very pronounced, despite the strong appetite for main market IPOs early in the year. In the full year, there were 651 cash calls and IPOs on AIM, compared to 151 on the main market. However, the disparity in the size of the companies listing meant that non-AIM IPOs raised GBP10.2bn, compared to GBP2.5bn on AIM.
In the first two months of 2015, there were 76 new issues or rights issues on AIM, compared to 13 across the other markets.
Kilmartin adds: “Young companies tend to have lean management teams, and much smaller infrastructures than more established companies, meaning they are have less experience in traversing the administrative and financial minefield of rapid expansion and are primarily focused on day to day business activity. So as a growing number consider the next stage of their development, and whether or not to list on AIM to facilitate this growth, third party support from providers such as Capita Asset Services will be increasingly important.”
