London's AIM - Secondary Offering Activity - 2009

Highlights

• Secondary offering funds raised on the London Stock Exchange's AIM increases 51%
• £4.9 billion ($7.8 billion) raised in secondary offerings on London's AIM during 2009
• Relative number of London AIM-listed companies completing secondary offerings on London's AIM rebounds

2007 – 57%                             2008 – 36%                             2009 – 54%

• Average size of secondary offerings on London's AIM increases by 19%

2008 – £5.38m ($8.61m)         2009 – £6.38m ($10.21m)

• Exclusive of three large secondary offerings, average London AIM Placing holds firm

2008 – £5.34m ($8.54m)         2009 – £5.36m ($8.58m)

• 70% of secondary offerings on the London Stock Exchange's AIM raise < £3m but noticeable increase in the £5 – £10m range

• London's AIM has expelled the vast majority of the weak and is supporting those that remain

The success of the secondary offering market on the London Stock Exchange's AIM is indisputable, which is the defining characteristic of a mature market.  From 2003 – 2006, the ratio of aggregate funds raised in London Stock Exchange AIM IPOs to aggregate funds raised in secondary offerings on London's AIM was 1.8; a relationship which has more than reversed during 2007 – 2009 where nearly 2.3 times more funds have been raised in London AIM secondary offerings than in London Stock Exchange AIM IPOs.  London's AIM was naturally maturing; 2007 was the first year where secondary offerings on London's AIM outpaced IPOs on London's AIM.  The financial crisis has accelerated the maturation process.

Year	London AIM IPO Funds Raised (in £ millions)	London AIM Secondary Offering Funds Raised (in £ millions)
2007	6,262	9,602
2008	918	3,214
2009	610	4,861
Total	7,790	17,677

Examining London's AIM at a more granular level for 2008 and 2009 reveals a sharp rise in secondary offering activity on the London Stock Exchange's AIM during the second half of 2009, in fact, 51% higher than the first half of 2008.

Half-Year	London AIM IPO Funds Raised (in £ millions)	London AIM Secondary Offering Funds Raised (in £ millions)
H1 ‘08	830	2,272
H2 ‘08	88	942
H1 ‘09	222	1,432
H2 ‘09	388	3,429
Total	1,528	8,075

However, one needs to dig a little deeper into the secondary offering activity on the London Stock Exchange's AIM in order to conclude on its health.  Historically, the vast majority of secondary offerings on London's AIM have taken the form of Placings, however, there were three large London AIM Placing & Open Offers during 2009 which raised an aggregate of £1.0 billion ($1.6 billion) of the £1.1 billion ($1.8 billion) total.  All three occurred during the second half of 2009 and were for real estate investment, development and management companies listed on London's AIM, with one company moving up to the Main Market of the London Stock Exchange a few months later.

The fact that the average London AIM Placing held firm, £5.34 million ($8.54 million) in 2008 and £5.36 million ($8.58 million) in 2009, is encouraging.

Type of Secondary Offering	2008# of SOs	2008 Gross Raised (in £ millions)	2008 Ave. Raised (in £ millions)	2009# of SOs	2009 Gross Raised (in £ millions)	2009 Ave. Raised (in £ millions)
P&OO*	3	25	8.33	21	1,123	53.48
Placing	580	3,098	5.34	673	3,607	5.36
Other	14	91	6.50	68	131	1.93
Total	597	3,214	5.38	762	4,861	6.38

*  Placing & Open Offer

The most positive sign of the health of the secondary offering market on London's AIM is the fact that 54% of all AIM-listed companies completed a secondary offering on the London Stock Exchange's AIM during 2009, up from 36% in 2008, and back to historic, pre financial crisis levels.  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 pattern from 2008 persisted throughout 2009 with 70% of secondary offerings on London's AIM raising less than £3 million.  The sub-£1 million secondaries on London's AIM were for companies where the London AIM investors wanted more time to determine whether or not the business is viable, whereas the noticeable increase in the £5 – £10 million range was for London AIM-listed companies where the investors want them to capitalize on organic and/or acquisitive growth opportunities.

 

The outlook for 2010, and perhaps the next several years, is for secondary offering activity on the London Stock Exchange's AIM to continue to outpace London AIM IPO activity.  At its peak in 2007, London's AIM was home to 1,700 companies whereas today 1,300 companies are listed on London's AIM.  Over the last two years, the weak companies listed on the London Stock Exchange's AIM have been expelled, through fire sale acquisitions or by simply delisting.  While the financial crisis has accelerated the natural selection process, it is clear that the vast majority of the remaining 1,300 companies listed on London's AIM will continue to find investor support from London AIM’s healthy and vibrant secondary offering market.