Initial public offerings on AIM slumped by up to 50 per cent last year as the full force of the credit crunch hit the growth markets. The accountancy firm Baker Tilly, which last week released its findings from a survey of the AIM market, used football parlance when it called 2007 a "year of two halves".
It said: "As the year opened, AIM fared strongly, with more companies trading on it than the main market. In the second half of the year, however, AIM suffered from the macro forces that led to the 'credit crunch', which in turn affected most major economies and markets."
Overall, the value of IPOs fell to £6.6bn last year, down on 2006, while the number of companies attracted to the market slowed. More than 50 per cent of those surveyed said the market's performance was worse than expected.
Things aren't expected to get better in the short term with AIM investors approaching 2008 "with some nervousness," Baker Tilly said. Of those investors surveyed, 64 per cent expect a further drop in IPOs this year. The accountant pointed out that, while there are no shortage of funds available, "most investors are likely to wait for more stable conditions before putting larger amounts of capital to work – especially in higher-risk opportunities".
Investors in AIM are coming round to the increasing effect of globalism. Where before they saw the march of global finance as detrimental, today half of those asked see it as beneficial.
The international presence of AIM has the majority of investors believing there is a dearth of companies from the UK coming to market, with 46 per cent expecting a further reduction in UK groups coming to the market.
The findings come from Baker Tilly's 12th annual AIM survey in partnership with Faegre & Benson. The survey quizzed 200 companies quoted on Aim, 50 private companies and 50 institutional investors actively investing in AIM-listed groups.
Baker Tilly said: "Undoubtedly, the market faces a very difficult external environment. The global credit crunch and resulting market volatility have increased risk aversion among investors to an unprecedented level. But this impacts smaller companies everywhere – not only on AIM."
The accountancy firm said AIM would undergo an "inevitable" period of consolidation, but added this could have a positive effect by increasing the quality of new entrants to the market.
There were some positive findings in the survey. It pointed out that the top 20 risers on AIM all rose in value by 150 per cent or more, and the pick, the e-commerce group ArgentVive, rose more than 2,000 per cent during 2007.
Another segment of the market to benefit was secondary issues, with the volume increasing by two-thirds last year to a new record of £9.6bn. Nearly half the investors surveyed said they had increased the proportion of funds going into secondary funding.
St Helen's Capital
It is a big day for the small-cap broker St Helen's Capital, the independent institutional stockbroker, as it switches its listing from Plus Markets to AIM, in a bid to boost its profile and, according to the chief executive, "practise what we preach".
The group is the leading adviser on Plus, but since two senior arrivals from the broker Daniel Stewart last year the company has changed its focus to concentrate on AIM broking. Rauri McGirr took over as chief executive and Seb Wykham joined as executive director in February 2007 and have set about overhauling the structure, including raising money to recapitalise the business.
The benefits are already being felt. Results for the six months to the end of September showed pre-tax profits of £990,000, turning around a loss of £90,000 the previous year.
The move to AIM is seen as the next landmark step in the company's development. The management said its decision to switch was taken to "raise its profile within the target corporate and institutional markets". Mr McGirr said the move was "important in our strategy to further strengthen our presence in a small-cap arena and attract high-quality individuals to the team". He added as it increasingly looked to raise money for companies on AIM the group felt it should trade on the London Stock Exchange's junior market itself.Reuse content