Research from GrowthBusiness sister title Growth Company Investor has identified a growing number of cash shells on London’s junior stock exchange, as well as the Main Market and ISDX.
Cash shells, which are defined as companies that have a stock market quotation but not trading business, on the Alternative Investment Market (AIM) now hold 559.6 million in cash. This total represents the vast majority of the £572.3 million found on AIM, the Main Market and ISDX.
The figure is more than double the amount of cash held in 2012, when the amount stood at £237.9 million.
The role of cash shells is often to provide expanding businesses the platform to pursue further growth on the capital markets. Companies often choose to reverse into a cash shell and gain a stock market listing without the complicated process of undergoing an IPO.
However, some of the shells, such as AIM-quoted Longships and Shellshock have been on the market for a number of years without finding a suitable target for a reverse takeover. Shellshock is incorporated in Belize and majority-owned by Conservative party donor Lord Ashcroft.
More on cash shells:
A change in AIM’s rules governing shells in 2006 made it more difficult for inactive companies to remain listed. The number of shells on AIM thus fell to just 12 by 2009, but has since rapidly increased as a result of more AIM-quoted businesses failing and an increasing number of purpose-built shells joining the market with sufficient cash on the balance sheet to meet the AIM rules.
The Cash Shells Directory is compiled by Vitesse Media Research in association with Growth Company Investor. Vitesse Media Research has produced annual research into cash shells since 2005, when 88 shell companies were listed on AIM with total cash of £77.1 million.