With market activity limiting the scope of new issues on the growth markets, there are relatively few companies making the jump.
The nature of the markets means that predictions are almost out of date by the time they make it into the public sphere, with economic turmoil making reading the current situation ever more difficult.
Geraldine Fabre, partner at City law firm Pritchard Englefield, which specialises in capital markets and UK and international M&A work, says that people are often choosing to watch market activity but do not have the eagerness to make any moves themselves.
Fabre sees the natural resources and commodity sector as the area that is seeing the most activity, a view that has been mirrored by the work that Pritchard Englefield has been involved with during the past six months.
The London-based law firm advised on the June flotation on AIM of Australian iron ore and magnetite business Strategic Minerals. The IPO achieved a market cap of £14.8 million, with Fabre pointing out favourable features such as good transport links as one of its prevailing benefits.
She adds, ‘Australia has a high measure of political stability and a legal and regulatory environment well versed in resource flotations.’
The resource business was led through a pre-IPO funding structure, a move which works quite well for mining companies, says Pritchard Englefield partner Nicholas Roche.
‘There are people who are willing to fund the initial stages with pre-IPO funding, which is good. However, I suppose it is about timing and the type of mineral resource that one has available,’ Roche explains.
The price of commodities is one factor that Roche sees as influencing older ventures. ‘A resource which has been historically mined but abandoned due to the economic viability of the activity can often be revisited at a later date as prices go up and suddenly it becomes economical to develop the site again,’ he comments.
In other market activity, Pritchard Englefield was part of the teams which saw commodities companies Rare Minerals
and Mandarin Mining join the growth market PLUS.
Explaining the deals, Fabre adds, ‘They were both set up as investment companies, with the initial funding put into the business so that they could be vehicles to make investments and acquisitions.’
Fabre sees this kind of transaction structure as one which is particularly straightforward on the PLUS market.
She adds, ‘PLUS has a measure of flexibility, and at the moment, with AIM companies needing minimum investments, PLUS gives companies if not necessarily a market, a structure which can be used to make acquisitions.’
Roche believes that AIM is still a good market to bring businesses to, with the junior market competing well with
the likes of Toronto, Singapore and Hong Kong.
Looking at prospects, Fabre adds, ‘There is a certain amount of opportunism in that there are undervalued assets which many are considering acquiring.’
Geraldine Fabre, Partner
Tel: 020 7650 3831
Nicholas Roche, Partner
Tel: 020 7650 3840