A paltry £3m of new money was raised on the Alternative Investment Market (Aim) in the first quarter of 2009, a report from accountants Deloitte will say today.
As wary investors look to less risky options, the exchange is effectively closed for companies looking for financing, the quarterly Aim report says.
Listed small-cap companies have been struggling to raise equity funding for some months. Just £13m of new money was raised in the last quarter of 2008, the lowest level for a decade. But activity has now dropped through the floor.
Richard Thornhill, Deloitte's capital markets director, said: "The new year has brought such low levels of new companies coming to Aim, that to all intents and purposes the fund-raising market for new companies on Aim does not exist."
The figures will come as desperate, but unsurprising, news to a host of Aim-listed companies that had hoped to raise money from funds.
For several years before the onset of the current financial crisis, a plethora of different types of company – including small-cap miners, oil and gas exploration outfits, and biotech groups – listed on Aim and repeatedly tapped shareholders for money to burn on research or exploration. Investors were happy to back such "heady" projects, said Mr Thornhill.
But funds are drying up as backers look for safer bets and institutional investors are increasingly moving money to bigger companies on the main list. Anything with a small market capitalisation stands very little chance of attracting financing, according to Mr Thornhill.
The Deloitte report also highlights dwindling interest in a public listing among small privately owned companies. In the early months of 2008, there was still a queue of companies wanting to list, even without the opportunity to raise money.
But only one company listed in the first quarter of this year. "[In early 2008, listing] was considered a good way to get the administrative element of the listing process out of the way to leave the company in question well placed to raise funds quickly when the markets turned," Mr Thornhill said. "Come 2009, however, the number of companies wanting to take this route has also dried up."
The London Stock Exchange, which runs Aim, blames the economic climate and says that the small-cap market is facing no greater trouble than other exchanges. "The picture painted by this research must be seen within the context of wider market conditions, which have seen initial public offering volumes drop globally, across both large and small-cap markets," a spokesman said.
"Despite the difficult economic climate, Aim continues to enable companies to raise equity finance: further fund-raising in March this year was up by nearly 20 per cent on last year."Reuse content