London's AIM - Secondary Offering Activity - H1 2009

Highlights

• Number of secondary offerings on the London Stock Exchange's AIM increase 6% from H1 2008 and 27% from H2 2008
• Secondary offering funds raised on London's AIM down 35% from H1 2008 but up 54% from H2 2008
• £1.4b raised in secondary offerings on the London Stock Exchange's AIM during H1 2009….six fold more than raised in London AIM IPOs
• 23% of London AIM-listed companies completed secondary offerings on London's AIM during H1 2009

• Average size of secondary offerings on London's AIM shrinks from H1 2008 but increases from H2 2008

      H1 2008 – £6.97m               H2 2008 – £3.54m               H1 2009 – £4.28m

• 75% of secondary offerings on London's AIM raise < £3m but noticeable increase in the £5 - £10m range
• ‘Operating companies’ listed on the London Stock Exchange's AIM continue to capture ~80% of secondary offering funds raised on London's AIM

• London's AIM continues the cleansing process, access to funds separate strong from weak
• Outlook:  H2 2009, flat compared to H1 2009 as London's AIM continues to stabilize

The success of the secondary offering market on London's AIM is indisputable, which is the defining characteristic of a mature market.  From 2003 – 2006, the ratio of aggregate funds raised in London AIM IPOs to aggregate funds raised in London Stock Exchange AIM secondary offerings was 1.8; a relationship which reversed during the period from 2007 – H1 2009.

‘Operating companies’ listed on London's AIM captured 80% of the secondary offering funds raised on London's AIM over the last year-and-a-half which supports the view that the London Stock Exchange's AIM is shifting back to its original purpose of funding growth-oriented SMEs and away from ‘investment vehicles’ such as SPACs and Investment and Real Estate Funds.

All Companies	London AIM IPO Funds Raised (in £ millions)	London AIM Secondary Offering Funds Raised (in £ millions)
H1 2008	830	2,195
H2 2008	88	932
H1 2009	222	1,433
Total	1,140	4,560

Exclusive of SPACs and Investment and Real Estate Funds:

‘Operating Companies’	London AIM IPO Funds Raised (in £ millions)	London AIM Secondary Offering Funds Raised (in £ millions)
H1 2008	455	1,701
H2 2008	68	838
H1 2009	-	1,108
Total	523	3,647

The extreme caution on the London Stock Exchange's AIM during the second half of 2008 has abated with a 27% increase in the number of secondary offerings on London's AIM and a 54% increase in gross funds raised on London's AIM.

All Companies	Number of London AIM Secondaries	Gross Funds Raised (in £ millions)	Average Funds Raised (in £ millions)
H1 2008	315	2,195	6.97
H2 2008	263	932	3.54
H1 2009	335	1,433	4.28
Total	913	4,560	4.99

Exclusive of SPACs and Investment and Real Estate Funds:

‘Operating Companies’	Number of London AIM Secondaries	Gross Funds Raised (in £ millions)	Average Funds Raised (in £ millions)
H1 2008	267	1,701	6.37
H2 2008	226	838	3.71
H1 2009	301	1,108	3.68
Total	794	3,647	4.59

The pattern from the second half of 2008 has persisted into the first half of 2009 with 75% of secondary offerings on the London Stock Exchange's AIM raising less than £3 million.  The sub-£1 million secondaries are for companies listed on London's AIM where London AIM investors want more time to determine whether or not the business is viable, whereas the noticeable increase in £5 – £10 million secondaries on London's AIM are for companies listed on the London Stock Exchange's AIM where London AIM investors want them to capitalize on organic and/or acquisitive growth opportunities.

 

The relative number of companies listed on London's AIM that were able to complete secondary offerings on the London Stock Exchange's AIM during the first half of 2009 spiked to 23% from 16% during the second half of 2008 and even exceeded the 19% that completed secondary offerings on London's AIM during the first half of 2008.  As mentioned above, the breadth and depth of secondary offering activity on the London Stock Exchange's AIM is the defining characteristic of a mature market.

The outlook on London's AIM for the second half of 2009 is for secondary offering activity on the London Stock Exchange's AIM to be flat compared to the first half of 2009 as London's AIM continues to stabilize.  London's AIM will continue its shift back to its original purpose of funding growth-oriented SMEs to the exclusion of ‘investment vehicles’ listed on London's AIM.  Access, or lack of access, to secondary offering funds on London's AIM during the second half of 2009 should largely complete the process of London AIM investors selecting the viable companies that will remain listed on the London Stock Exchange's AIM.