London's AIM - Secondary Offering Activity - 2008

Highlights

• Number of secondary offerings on the London Stock Exchange's AIM and aggregate funds raised on London's AIM drop by 39% and 68%, respectively
• £3.1b raised in secondary offerings on London's AIM during 2008….240% more than raised in IPOs on London's AIM
• 36% of London AIM-listed companies completed secondary offerings on London's AIM during 2008

• Average size of secondary offerings on the London Stock Exchange's AIM shrinks by 50% to £5m as London's AIM remains cautious
• 2008 number, average size and distribution of secondary offerings on London's AIM reminiscent of 2005
• London's AIM seen as shifting back to its original purpose of funding growth-oriented SMEs

• Access, or lack of access, to funds on the London Stock Exchange's AIM separate strong from weak and cleanses London's AIM
• Outlook:  H1 2009, very slow; H2 2009 modest recovery on London's driven by the strong companies

The success of the secondary offering market on London's AIM is indisputable; however, that success should not be viewed in isolation, but rather through the lens of the broader market for London Stock Exchange AIM IPOs.  The trend which began 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 the London Stock Exchange's AIM has largely come to an end.  The effect on the London AIM IPO market was dramatic but the effect on the secondary offering market on London's AIM was more modest.

‘Operating companies’ listed on the London Stock Exchange's AIM captured 57% of the London AIM IPO funds raised during 2008 but only 32% during 2007.  The comparable metrics for the secondary offering market on London's AIM were 81% during 2008 and 68% during 2007.

All Companies	London AIM IPO Funds Raised (in £ billions)	London AIM Secondary Offering Funds Raised (in £ billions)
2007	6.26	9.71
2008	0.92	3.13

Exclusive of SPACs and Investment and Real Estate Funds:

‘Operating Companies’	London AIM IPO Funds Raised (in £ billions)	London AIM Secondary Offering Funds Raised (in £ billions)
2007	1.99	6.59
2008	0.52	2.54

The average size of secondary offerings shrunk by 50% as the market remains cautious.

All Companies	Number of Secondary Offerings	Gross Funds Raised (in £ billions)	Average Funds Raised (in £ millions)
2007	949	9.71	10.23
2008	578	3.13	5.41

During 2008, 80% of all secondary offerings on London's AIM were for less than £5 million whereas 80% of all secondary offerings on the London Stock Exchange's AIM in 2007 were for less than £10 million, reflecting a cautious London's AIM.  Interestingly, the number, average size and distribution of secondary offerings on the London Stock Exchange's AIM during 2008 is reminiscent of 2005, supporting the view that London's AIM is shifting back to its original purpose of funding growth-oriented SMEs.

 

The relative number of companies listed on London's AIM that were able to complete secondary offerings on London's AIM during 2008 remains healthy at 36%; however, this does represent a decrease from 57% in 2007. 

   

The London AIM outlook for 2009 is for secondary offering activity on the London Stock Exchange's AIM during H1 to be very slow with a modest recovery during H2.  It is believed that London's AIM will shift strongly back to its original purpose of funding growth-oriented SMEs and that access, or lack of access, to secondary offering funds on London's AIM during 2009 will separate the strong companies from the weak companies listed on the London Stock Exchange's AIM and ultimately cleanse London's AIM.