AIM Market sees light at the end of tunnel

Release date: 15/9/2010

The financial crisis and recession which followed posed significant challenges for the AIM Market. The number of listed companies fell significantly and is predicted to continue to fall for much of the rest of this year. But a closer look at the statistics shows there are still reasons to be optimistic and suggests 2011 is set to see the market's return, says specialist Harvey Ingram AIM lawyer Stephen McElhone.

By the end of 2009, the number of companies listed on AIM had fallen from a peak of 1,694 in December 2007, to below 1,300. Recent analysis by Deloitte predicts this trend will continue throughout the autumn, before reaching a low of around 1,200 by the end of the year. So why the cautious optimism?

First, the number of delistings in 2009 was 293 and not significantly higher than in 2008, when 259 companies delisted. The reason for the fall in overall numbers was primarily down to just 13 companies entering the market by Initial Public Offering in 2009. For many of those companies which stayed on AIM, 2009 saw investors offering significantly increased levels of support. While cautious investors were reluctant to support new offerings, secondary fund-raisings, those funds raised by companies already listed on the market, increased from £3.2 billion in 2008, to £4.8 billion in 2009.

Second is the fact that the companies opting to delist were generally the smallest on AIM and meant that the average market value of an AIM-listed company at the end of 2009, stood at £44 million - compared to only £24 million at the end of 2008. This shake-out appears to have gone a long way towards boosting investor confidence in AIM companies, while the strong support for the companies which remained listed has undoubtedly bolstered satisfaction with the market.

Since then, the Deloitte analysis highlights a steady increase in activity levels throughout 2010. Following 16 new listings in Q1, there another 18 during Q2, compared with just eight during the same period last year. The rate of companies leaving the market has also slowed, prompting commentators to conclude that the numbers of AIM-listed companies will start climbing again by the end of the year.

Any significant increase in new AIM listings will need a level of economic certainty which is unlikely to be seen before the ripples caused by next month's spending review have subsided. But the trends seen during the past 18 months are cause for cautious optimism as we head towards 2011.

For further information please contact Stephen McElhone.