This post provides the outlook for London Stock Exchange AIM IPOs and the key listing, financial and operating metrics for the 16 London AIM IPOs that completed during the first half of 2010.
Highlights
- London AIM IPO activity accelerates, H1 2010 (16 London AIM IPOs) exceeds the full year 2009 (13 London AIM IPOs)
- ‘Operating companies’ listing on London's AIM return, account for 75% of H1 2010 London AIM IPOs, mirror image of 2009
- However, London's AIM remains fragile and below trend (50 - 150 yearly) for foreseeable future
- Given market conditions, prospective issuers should carefully consider:
- Suitability before embarking on the process of listing on London's AIM
- Key advisers, most notably AIM Nominated Advisers (Nomads) and AIM Nominated Brokers
- Surprisingly, only 4 of the 16 companies listing on the London Stock Exchange's AIM had revenues > £1 million (range £1m - £58m)
- Those 4 broadly in the tech space (computing and cleantech)
- Other 12 broadly in the natural resources space or ‘investment vehicles’
- Key listing metrics for the 16 London Stock Exchange AIM IPOs are as follows:
- Aggregate capital raised on London's AIM of £350 million ($560 million)
- 90% of the capital raised for the companies listing on London's AIM and 10% for selling shareholders
- Average and median capital raised on London's AIM of £22m ($35m) and £12m ($19m)
- Average and median offering costs on London's AIM both 10% of gross capital raised
- Average and median opening market cap upon listing on London's AIM of £59m ($94m) and £38m ($61m)
- Average and median share price gain since listing on London's AIM of 47% and 20%
- Average and median dilution to existing shareholders of 43% and 26%
- Average and median free float on London's AIM of 49% and 46%
- Key financial and operating metrics for the 16 companies listing on the London Stock Exchange's AIM are as follows:
- Revenue and income/loss figures for most AIM-listed companies not meaningful given early stage profile
- Average and median assets of £16m ($26m) and £8m ($13m)
- Of the 4 companies listing on London's AIM with revenue > £1 million, 3 were profitable
- Of those 3, 2 had small profits, therefore, PE & EBITDA multiples not meaningful
- The 1 with ‘normal profits’ had trailing PE of 18 and trailing EBITDA of 9
- Country of operation for companies listing on the London Stock Exchange's AIM is UK/Scotland for 7 with the others in 9 different countries
- 2 are dual listed on the ASX with 1 utilizing the Designated Markets Route to London's AIM
- 13 different AIM Nominated Advisers (Nomads) and 13 different AIM Nominated Brokers with 3 acting for 2 companies each
- Only 3 companies appointed a Joint Nominated Broker
All Companies
|
Number of
London AIM IPOs
|
Gross Funds Raised
(in £ millions)
|
Average Funds
Raised
(in £ millions)
|
H1 2009
|
2
|
222
|
111
|
H2 2009
|
11
|
388
|
35
|
H1 2010
|
16
|
350
|
22
|
Total
|
29
|
960
|
33
|
Exclusive of Investment and Real Estate Funds:
‘Operating Companies’
|
Number of
London AIM IPOs |
Gross Funds Raised
(in £ millions)
|
Average Funds
Raised
(in £ millions)
|
H1 2009
|
-
|
-
|
N/A
|
H2 2009
|
3
|
16
|
5
|
H1 2010
|
12
|
211
|
18
|
Total
|
15
|
227
|
15
|
The key takeaway from comparing the tables above is the
return of ‘operating companies’ listing on the London Stock Exchange's AIM.
The £18 million ($29 million) average raised on London's AIM by these ‘operating
companies’ is consistent with 2007 and 2008 when 111 and 26 ‘operating
companies’ listed on London's AIM and raised an average of £18 million ($29 million) and
£20 million ($32 million), respectively.
While the return of ‘operating companies’ to the London Stock Exchange's AIM is a
positive sign, the London AIM IPO market remains below trend (50 - 150 yearly) and is
expected to remain so for the foreseeable future. In addition to the current macroeconomic
situation, the Secondary Offering market on London's AIM has been booming (£2.1 billion
or $3.4 billion raised during the first half of 2010) as a result of attractive
valuations for companies listed on London's AIM that are ‘known quantities’. The strength of the Secondary Offering market
on London's is a positive sign for London Stock Exchange AIM IPOs over the medium to longer term as London AIM investors remain
confident in the market; however, the shifting of their risk profiles towards
London AIM IPOs is sure to be gradual.
It was surprising that the types of ‘operating companies’
listing on the London Stock Exchange's AIM during the first half of 2010 fell into two very distinct categories;
those with revenue traction and profits, or very close to profitability, and
natural resource plays (mining and oil and gas) at a very nascent stage. The latter all had owned or identifiable
assets, solid geological studies and exceptional management teams with
demonstrable track records of success.
The first chart below provides the distribution
of gross funds raised from London Stock Exchange AIM IPOs during 2009 and the first half of 2010. The sweetspot for London AIM IPOs is between £5
million ($8 million) and £50 million ($80 million).
The second chart below highlights an interesting
shift on the London Stock Exchange's AIM that occurred during 2008, a substantial decrease in London AIM IPO
dilution of existing shareholders. 2009
is viewed as an anomaly given the lack of activity.
There are two main reasons for this shift. First, the London Stock Exchange codified the AIM Nominated Advisers (Nomads) Rules in early 2007 which 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 admission to London's AIM.
Second, London AIM investors have become more risk adverse. Consequently, the quality of the companies
listing on the London Stock Exchange's AIM has increased and, as a result, the London AIM IPO dilution of
existing shareholders has decreased.
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