London's AIM - IPO Activity - H1 2008

Highlights

• Number of London Stock Exchange AIM IPOs and aggregate funds raised on London's AIM drop by 66% and 75%, respectively
• Decreases for ‘operating companies’ listing on London's AIM were less dramatic with both at 57%
• Average funds raised on London's for ‘operating companies’ listing on London's AIM holds firm at £21m
• 80% of IPOs on the London Stock Exchange's AIM in both half years raise between £3m and £100m
• First time since 2005 that majority of funds raised on London's AIM (55%) was for ‘operating companies’
• Substantial decrease in London AIM IPO dilution of existing shareholders of ‘operating companies’

H1 2007 – 36%                             H2 2007 – 32%                       H1 2008 – 24%

• Selective market but quality companies are listing on London's AIM and being rewarded with less dilution
• London's AIM shifting back to its original purpose of funding growth-oriented SMEs
• Outlook:  30 more IPOs on London's AIM in H2 2008 and a further shift towards ‘operating companies’ listing on London's AIM

The trend which began on the London Stock Exchange's AIM in 2006, and continued throughout 2007, of a significant number of Special Purpose Acquisition Corporations (SPACs) and Investment and Real Estate Funds completing IPOs on London's AIM has come to an end.  During the first half of 2008, only nine Investment Funds listed on the London Stock Exchange's AIM and there were no SPAC or Real Estate Investment Fund IPOs on London's AIM.  These ‘investment vehicles’ listing on London's AIM cause the overall market metrics to be misleading.

The key takeaway from comparing the tables below is that only 57% of listings on London's AIM during the first half of 2007 were for ‘operating companies’ and those companies only captured 32% of the gross funds raised on the London Stock Exchange's AIM.  During the first half of 2008, 71% of the IPOs on London's AIM were for ‘operating companies’ and, for the first time since 2005, they captured a majority (55%) of the gross funds raised on the London Stock Exchange's AIM.

All Companies	Number of London AIM IPOs	Gross Funds Raised (in £ billions)	Average Funds Raised (in £ millions)
H1 2007	90	3.33	37
H1 2008	31	0.83	27

Exclusive of SPACs and Investment and Real Estate Funds:

‘Operating Companies’	Number of London AIM IPOs	Gross Funds Raised (in £ billions)	Average Funds Raised (in £ millions)
H1 2007	51	1.05	21
H1 2008	22	0.46	21

Notwithstanding the bifurcation of the London AIM IPO market between ‘investment vehicles’ and ‘operating companies’, 80% of the IPOs on the London Stock Exchange's AIM in each half year raised between £3 and £100 million.

 

While London's AIM has certainly not been immune to the global slowdown in IPOs, the codification of the AIM Nominated Advisers (Nomads) Rules in early 2007 has increased the scrutiny of prospective companies listing on London's AIM by AIM Nominated Advisers (Nomads) since the AIM Nominated Adviser (Nomad) vouches to the London Stock Exchange (LSE) as to a company’s suitability for listing on London's AIM.  Consequently, the quality of the companies listing on London's AIM has increased and, as a result, the London AIM IPO dilution of existing shareholders has decreased.

 

The outlook for the balance of 2008 is for another 30 London AIM IPOs and a further shift towards ‘operating companies’ listing on the London Stock Exchange's AIM.  The London AIM IPO market will continue to be cautious and selective; focusing on more mature, higher quality ‘operating companies’ with London AIM IPO fundraisings averaging around £20 million.