The AIM Market – heading for trouble in 2019?
On the face of it, things do not currently look too rosy for the AIM market. There has just been one new IPO on AIM since the turn of the year. In the same period last year, there were nine.
Indeed, last year as a whole saw a regular stream of IPO’s on AIM. In 2018 there were 9, 19, 6 and 8 listings respectively, per quarter.
The health of any market is shown, to a greater or lesser extent, by the number of new companies that are willing to go through the time and (considerable) expense to raise finance.
Moreover, given that Q4 of 2018 saw an almost record breaking number of trade and Private Equity M&A deals (748 in total), it would be easy to conclude that the AIM market is facing trouble with company owners increasingly considering alternative ways of obtaining the finance to either exit or grow their business.
However, as always when confronted by headlines and statistics it is worth digging deeper to understand the broader picture.
On a macro level, whilst the 43 admissions of 2018 is down from 50 l in 2017, it is still one more than the 42 that occurred in 2016. This would seem to indicate that there is no overall downward trend –other factors are likely to be at play.
The overwhelming weight of evidence indicates that the principal reason for the lack of AIM IPOs so far this year is nervous investor sentiment generally. There is no shortage of companies seeking admission to AIM.
We have recent first-hand knowledge of companies who are keen to IPO but have had to delay on advice from their brokers that the market would not buy at a price that would have made the transactions viable.
It is undeniable that in the short term, the uncertainty of Brexit has caused a pause in making such “public” investments by Institutional investors. However, monies have been raised and need to be placed in order to grow. With the comparable difficulties of finding the “right” investment to place PE money, it is likely that, once the markets have settled (hopefully by this summer) a flurry of deals will come to AIM.
Ironically, whilst there are risks associated with any investment, the requirements of AIM Rule 26 that each AIM company must adopt a corporate governance code, identify the chosen code on its web-site and explain how it complies (or why it has not complied) with that code makes the AIM market a better regulated place for making investments.
We will continue to watch the AIM market with interest and will provide updates throughout the year. For further information or to discuss any questions you may have, contact Stuart James.