London's AIM - IPO Activity - 2008

Highlights

• Number of London AIM IPOs and aggregate funds raised on London's AIM drop by 79% and 85%, respectively
• Decreases for ‘operating companies’ listing on London's AIM slightly less at 76% and 74%, respectively
• Average funds raised for ‘operating companies’ listing on London's AIM increases slightly to £19m
• 75% of London Stock Exchange AIM IPOs in both years raise between £3m and £100m

• First time since 2005 that majority of funds raised on London's AIM (57%) was for ‘operating companies’
• Substantial decrease in London Stock Exchange AIM IPO dilution of existing shareholders of ‘operating companies’ listing on London's AIM

2007 – 34%                             2008 – 25% 

• Very selective market with funds available for high quality companies at less dilution
• London's AIM seen as shifting back to its original purpose of funding growth-oriented SMEs

• Outlook:  H1 2009 London AIM IPOs, very slow; H2 2009 London AIM IPOs, tepid recovery with a strong flight to quality

The trend which began in 2006 on the London Stock Exchange's AIM, and continued throughout 2007, of a significant number of Special Purpose Acquisition Corporations (SPACs) and Investment and Real Estate Funds listing on London's AIM, has largely come to an end.  During 2008, only 10 Investment Funds and one Real Estate Fund listed on London's AIM with no SPAC IPOs.  These ‘investment vehicles’ cause the overall London AIM metrics to be misleading.

The key takeaway from comparing the tables below is that only 61% of the London Stock Exchange AIM IPOs during 2007 were for ‘operating companies’ listing on London's AIM and those companies only captured 32% of the gross funds raised on the London Stock Exchange's AIM.  During 2008, 71% of the listings on the London Stock Exchange's AIM were for ‘operating companies’ and, for the first time since 2005, they captured a majority (57%) of the gross funds raised on London's AIM.

All Companies	Number of London AIM IPOs	Gross Funds Raised (in £ billions)	Average Funds Raised (in £ millions)
2007	182	6.26	34
2008	38	0.92	24

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)
2007	111	1.99	18
2008	27	0.52	19

Notwithstanding the bifurcation of the London AIM IPO market between ‘investment vehicles’ and ‘operating companies’, 75% of the listings on the London Stock Exchange's AIM in each 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 Rules for Nominated Advisers (Nomads) in early 2007 has increased the scrutiny of prospective companies listing on London's AIM by Nominated Advisers (Nomads) since the 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 the London Stock Exchange's AIM has increased and, as a result, the IPO dilution of existing shareholders has decreased. 

 

The outlook for 2009 is for London AIM IPO activity during H1 to be very slow with a tepid recovery during H2.  It is believed that London's AIM will shift strongly back to its original purpose of funding growth-oriented SMEs listing on the London Stock Exchange's AIM and that there will be an extreme flight to quality with London AIM IPO fundraisings for more mature ‘operating companies’ pushing up above £20 million.