Investor doubts hit planned AIM floats

A wave of impending flotations on the Alternative Investment Market are in trouble, with several likely to be delayed or pulled altogether, because institutional investors are getting cold feet. At the very least, their reticence will result in lower prices for new stocks.

Stockbrokers for several companies admitted privately they were already having trouble building books for smaller companies. One company, VLSI, last week pulled out of its planned listing and is now putting together other financing. "There have been problems and there will be more. Nobody's getting an easy ride any more," said an adviser close to the deal.

Among companies believed to be on their way to the market are: Biotherapeutics, which has a technique for non-surgical face-lifts; SCi, a computer game maker; and Network Technology, which supplies hardware and software for computer networks.

One fund manager said all proposed new listings were struggling, including those heading for the main Stock Exchange. But AIM, the year-old junior market for smaller companies, will be particularly hard hit. It is inherently more volatile and has a short track record.

Investors are doubly jittery because AIM has yet to have a serious collapse. "A real disaster, one that burned a lot of fingers, would be a good lesson right now," said an industry insider. "It would make the advisers as cautious as the fund managers."

The retreat by investors is not immediately obvious, with AIM recording eight new listings last week, well above its average of one or two a week.

But fund managers say the problem runs deep. "We're having trouble finding value in the new issues market," said a manager at a large pension fund. "The ones we have looked at lately have not impressed us."

Some institutions fear that the ease of getting an AIM listing, and the eagerness of advisers to push companies on to the market, are contributing to the low quality of stocks on offer. While main board flotations follow rigorous due diligence, AIM listings have far fewer checks.