If the rest of 2009 is anything like the year's first day of trading on the Alternative Investment Market (AIM) on Friday, everyone is in for an unexpectedly good 12 months.
The all-share index of small-cap companies closed up 2.1 per cent at 402.65 on Friday as traders returned to their desks after the Christmas holidays, with miners and energy groups in particular going some way to claw back some of the huge losses of last year.
The day's biggest winner was GCM Resources, previously known as Asia Energy, a coal exploration group. Its share price skyrocketed by some 202.9 per cent as the market grows in confidence that the new government in Bangladesh will finally decide on a new coal mining policy after two years of delays caused by ineffective administrations. Even so, support for GCM is a bit of a stab in the dark: like so many AIM-listed miners and exploration groups, the company is yet to draw any coal to the surface in Bangladesh, even if it does now have a much better chance of doing so.
Matra Petroleum, the Russian-foc-used oil group, also enjoyed a good day, closing up 65 per cent, after falling by more than 94 per cent last year. On closer inspection, the increase is less impressive, with the shares ending the day on just 0.83p.
Friday may not reflect a huge breakthrough for Matra, but nonetheless the spike will be welcomed by the group, which has a market capitalisation of just a touch over £2m. The group announced this morning that it has secured licensing extensions in Russia.
Despite the general good news last week, any sensible punter is betting that Friday was little more than a flash in the pan, with 2009 expected to be one of the most difficult years since the inception of AIM 13 years ago. There is no indication that the changing of the year is going to bring any respite from what was, generally speaking, an atrocious year in 2008.
Investors are still reluctant to put money into groups that burn cash, often with only the vague promise of substantial returns years down the line. Clive Garston, an AIM specialist at the law firm Halliwells, reckons on a grim outlook for AIM in 2009.
"You can't be terribly optimistic about 2009," he says. "There is no appetite for equity funding at the moment, and certainly none for start-ups, hi-tech and generally riskier companies. Hopefully, this will start to change in 2009, but frankly, it is more likely to be 2010."
AIM market operators should be ready, therefore, to look back to the opening day of trading in 2009, as one of the few highlights for the market in what is likely to be a very choppy year.
China New Energy throws in the towel on public listing
If the likes of Clive Garston at Halliwells are right – and he is certainly in the majority camp – some small-cap companies might think that having a public listing that is not generating any investor interest is more trouble than it is worth.
The first such group to throw in the public listing towel is China New Energy, which has come to the conc-lusion that being listed on the PLUS index is simply a waste of time. "The directors believe that, in the current environment, any benefits of the listing are outweighed by the costs involved whilst there were no dealings in the company's shares in the past year," it announced in a statement to the stock exchange on Friday morning.
The company, which will carry on trading privately, was established as an investment vehicle in the renewable energy sector in China. Today, the group provides turnkey technology for China's bioethanol market. Investors now have 10 working days to object to the move, but since none of them bought or sold a single share in the whole of last year, it would be a surprise if anyone complains about the move by a company that reckons it gains no benefit whatsoever from being listed.
Cambrian buries some good news on merger deal
The Christmas period is infamous for public companies using the quieter holiday period to bury bad news. As investors, analysts and journalists slip away for the holidays, some of the more unscrupulous groups take the opportunity to release updates telling of disastrous progress.
And that is why it is surprising that the AIM-listed Cambrian Mining chose Christmas Eve to tell the world that it has agreed a merger deal with Western Canadian Coal, a Vancouver-based miner, which given market conditions, should be a good deal for both groups, which say simply that it was on 23 December that the deal came together, and better to get the news out.
The $52m agreement will help both companies weather the global economic downturn, they say: Cambrian's share price fell by more than 80 per cent in the last three months of last year. The stock did stage something of a recovery on Friday, climbing 1.9 per cent and closing at 27p on news that Western Canadian Coal has lent Cambrian $36m to pay off debt owed to Investec Bank. Cambrian describes the loan as being complementary to the merger talks, rather than being part of the deal. It points out that the interest level, at 12 per cent, is on commercial terms.
Cambrian already owns about 34 per cent of Western Canadian Coal's shares.Reuse content