AIM packs a punch

With a deep pool of liquidity, expectations are high for the Alternative Investment Market in 2010. Marc Barber reports

Those nascent exchanges seeking to steal the Alternative Investment Market’s (AIM) crown as the leading platform for growth companies would do well to note that for the year to November, the London Stock Exchange’s junior offspring raised over £4.5 billion for its companies.

Some £583.4 million of this was from new issues, though it’s no surprise to learn this figure is down 47 per cent on 2008 due to the freezing of global IPO markets. However, secondary fundraisings are up 28 per cent year-on-year to £3.9 billion. Marcus Stuttard, the head of AIM, sees such firepower, driven by institutional investors, as a strong vote of confidence.

‘If it wasn’t for the huge amounts of money raised over the past three to four years, people would be saying they can’t believe how much has been raised for smaller companies on a growth market during a recession,’ he comments.

Equity’s plunge

As for the value knocked off the exchange during the past 12 months, Stuttard argues that this needs to be placed firmly in the context of the recession. ‘At the end of December last year, the AIM All-Share Index sat at 394. It closed at the end of November this year at 653, up 66 per cent. You’ve got to remember that in the final quarter of last year we were in a state of massive turmoil.’

The number of companies listed on AIM now stands at 1,320, which is markedly lower than the 1,700 on the market during 2007. Stuttard points out that the volume of companies delisting hasn’t changed too drastically from years gone by. ‘The main reason for the reduced numbers is that we haven’t had IPOs topping the market up,’ he observes.

For companies considering an IPO, there will be questions about liquidity, especially for those at an earlier stage of their development. Stuttard still sees AIM very much as a platform for young, ambitious businesses keen to accelerate their growth. ‘But companies should be practical about what to expect,’ he warns. ‘In the past, there may have been a temptation to believe that by virtue of being on a public market, a company’s visibility will increase and liquidity will naturally follow. Now people have a much greater understanding that you get out of the market what you put in.’

Given that debt is a such a rare commodity at present, Stuttard argues that the equity to be gained on public markets will be ever more attractive. As for those companies already on AIM, he expects to see some real M&A activity during the year ahead.

‘I’ve no doubt about that and we’re already starting to see it,’ he says. ‘During the first part of the year, activity was hampered because of uncertainty about valuations. Now there is a bit more stability in the market and valuations are more realistic, which gives companies the confidence to make acquisitions.’

Marc Barber

Marc Barber

Marc was editor of GrowthBusiness from 2006 to 2010. He specialised in writing about entrepreneurs, private equity and venture capital, mid-market M&A, small caps and high-growth businesses.

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