This post provides some insight into each of the 46 companies listing on the London Stock Exchange's AIM; the industries and geographies in which they operate, their overall listing, financial and operating metrics and the outlook for London AIM IPOs.
Highlights
- London Stock Exchange AIM IPO activity accelerates, 46 London AIM IPOs during 2010 compared to only 13 London AIM IPOs during 2009
- 8 London AIM IPOs in each of Q1, Q2 and Q3
- 22 London AIM IPOs in Q4
- £1.0 billion ($1.6 billion) raised for IPOs on London's AIM in 2010 (£5.0 billion for secondary offerings)
- ‘Operating companies’ return to London's AIM, account for 78% of London Stock Exchange AIM IPOs, mirror image of 2009
- However, London's AIM remains selective and below trend (75 - 150) 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 Nominated Advisers (Nomads) and Nominated Brokers
- Average ‘operating company’ listing on London's AIM raised £20 million ($32 million)
- 67% of London AIM IPOs raised between £5 million and £75 million ($8 million and $120 million)
- Average opening market capitalization upon listing on London's AIM of £69 million ($110 million)
- 74% of opening market caps upon listing on London's AIM between £10 and £300 million ($16 and $480 million)
- London AIM IPO dilution of existing shareholders of ‘operating companies’ amounted to 29%
- Average and median share price return on London's AIM of 44% and 21% since IPO (median date 9/24/10)
- Average post-IPO free float on the London Stock Exchange's AIM of 48%
- 13 of the 46 companies listing on London's AIM had revenues > £1 million (range £1 million - £156 million)
- Concentrated in technology (4 of 4), industrials (3 of 7) and consumer services (2 of 4)
- Those w/o meaningful revenues broadly in the natural resources space or financials
- 4 of the 46 companies listing on London's AIM had profits > £1 million (range £2 million - £10 million)
- Average trailing PE and EBITDA multiples of 13.47 and 8.49, respectively
- Industry dispersion and insight into the 46 companies listing on the London Stock Exchange's AIM - see below
- Geographic dispersion and related commentary on the 46 companies listing on London's AIM - also see below
All Companies
|
Number of
London AIM IPOs
|
Gross Funds Raised
(in £ millions)
|
Average Funds
Raised
(in £ millions)
|
2008
|
38
|
918
|
24
|
2009
|
13
|
610*
|
47*
|
2010
|
46
|
1,017
|
22
|
Total
|
97
|
2,545
|
26
|
* Includes two large London AIM IPOs focused on acquiring
distressed real estate and distressed commercial businesses. If excluded, average drops to £23m.
‘Operating Companies’*
|
Number of
London AIM IPOs
|
Gross Funds Raised
(in £ millions)
|
Average Funds
Raised
(in £ millions)
|
2008
|
27
|
523
|
19
|
2009
|
3
|
16
|
5
|
2010
|
36
|
723
|
20
|
Total
|
66
|
1,262
|
19
|
* Generally excludes SPACs, Investing Companies
and Investment and Real Estate Funds.
The key takeaway from comparing the tables above is the
return of ‘operating companies’ listing on the London Stock Exchange's AIM which accounted for 78% of the companies
and 71% of the gross funds raised on London's AIM. The
£20 million ($32 million) average raised by the ‘operating companies’ listing on London's AIM is very consistent
with 2008 when the average was £19 million ($30 million) and even 2007 when the
average was £18 million ($29 million).
2009 is viewed as an anomaly given the lack of activity.
While the return of ‘operating companies’ listing on the London Stock Exchange's AIM is a
positive sign, London AIM IPOs remain below trend (75 - 150) and are 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 (£5.0 billion or $8.0 billion raised during 2010) as a
result of attractive valuations for companies listed on London's AIM that are ‘known quantities’. The strength of London AIM's Secondary Offering market
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.
The types of ‘operating companies’ listing on London's AIM during
2010 generally 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 chart below provides the distribution of gross funds
raised from London AIM IPOs during 2010. The sweet
spot for London Stock Exchange AIM IPOs is between £5 million ($8 million) and £75 million ($120
million).
Of the aggregate gross funds raised on the London Stock Exchange's AIM, 92% was for the
companies listing on London's AIM and 8% was for selling shareholders which were present in seven of
the London AIM IPOs, although, only five sold a meaningful stake. While the average amount of gross capital
raised in London AIM IPOs was £22 million ($35 million), the median was £11 million ($18 million).
The equation in the next chart can be used to predict the
cost of a London AIM IPO with 95% confidence. The
26 data points represent the gross funds raised on London's AIM and associated costs for the
‘operating company’ listings on the London Stock Exchange's AIM that raised between £3 million ($5 million) and £75
million ($120 million). Since the
average ‘operating company’ listing on London's AIM raised £20 million ($32 million), the expected
cost would be £1.70 million ($2.72 million) or 8.50% of the gross funds raised on London's AIM.
For London AIM as a whole, the average and median offering costs
amounted to 14% and 9%, respectively, of the gross funds raised on London's AIM, however, the
average is skewed by two ‘failed’ London AIM IPOs where the offering costs consumed 59%
and 100% of the gross funds raised on the London Stock Exchange's AIM. When
these two are ‘normalized’ with their offering costs set at 10% of the gross
funds raised on London's AIM, the average offering costs amounted to 10% of the gross funds
raised on London's AIM and the median remained the same at 9%.
When the same analysis is applied to all of the ‘operating companies’ listing on the London Stock Exchange's AIM,
the result is similar where the average and median offering costs drop from 15%
and 11%, respectively, to 11% and 10%, respectively, of the gross funds raised on London's AIM.
The chart below provides the
distribution of opening market capitalizations upon listing on London's AIM. The average company’s opening market
capitalization upon listing on London's AIM was £69 million ($110 million) whereas the median was £36
million ($58 million). 74% of the
companies listing on London's AIM commanded opening market capitalizations that ranged from £10 million
to £300 million ($16 million to $480 million).
The aggregate opening market capitalization upon listing on London's AIM of the 46
companies that completed IPOs on the London Stock Exchange's AIM during 2010 was £3.2 billion ($5.1 billion). The average and median post-IPO free float on London's AIM for these companies was 48% and 49%, respectively.
The next chart highlights an interesting shift in the market
that occurred during 2008, a substantial decrease in London Stock Exchange 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 Rules for Nominated
Advisers (Nomads) in early 2007 which increased the scrutiny of prospective new entrants
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. Second, London AIM investors have
become more risk adverse. Consequently,
the quality of the companies listing on London's AIM has increased and, as a
result, the London Stock Exchange AIM IPO dilution of existing shareholders has decreased.
For the London Stock Exchange's AIM as a whole, the average and median dilution of
existing shareholders was 38% and 28%, respectively. With respect to the ‘operating companies’ listing on London's AIM it
was 29% and 25%, respectively. The
expectation for the foreseeable future is for London AIM IPO dilution of existing
shareholder to remain in the 25% to 30% range.
The final chart in this section provides the distribution of
share price returns on the London Stock Exchange's AIM since each of the 46 companies listing on London's AIM completed their London AIM
IPOs. It’s important to note that the
median London AIM IPO date is September 24, 2010, therefore, the average and median returns
of 44% and 21%, respectively, only represent, on average, the last 98 days of
2010. As a point-of-reference, the FTSE
AIM All-Share Index rose 43% during all of 2010 and only 20% from September 24,
2010 through the end of the year, therefore, the aftermarket performance of the
46 London AIM IPOs has been quite strong.
London AIM Industry Dispersion
Companies listed on the London Stock Exchange's AIM are organized into 90 sub sectors which
feed into 40 sectors which feed into 10 super sectors. The only super sectors that were not
represented with London AIM IPOs during 2010 were Telecommunications and Utilities. The chart below provides a breakdown of the
eight super sectors in which one or more London Stock Exchange AIM IPO occurred during 2010. Since the classifications can be deceptive,
the table below the chart provides some insight into the individual companies.
Basic Materials
(13)
|
Mining; gold (5), iron ore (3), copper (2), diamonds (1)
and coal (1) and one cleantech company
|
Financials (8)
|
One that intends to invest in a U.K. public company for a
turnaround, one that would like to acquire and invest in natural resource
related assets, one involved in real estate investment and development, one
that intends to acquire or invest in hydropower projects, one that is a
country-specific investment company, one that is a new bank to be built
primarily through acquisition, one that is a full service broker-dealer and
one that intends to acquire or invest in the TMT sector
|
Industrials (7)
|
One intends to acquire businesses that are focused on
homeland security and defense, one designs and manufactures tracking devices
and provides related monitoring services, one provides business process
outsourcing services for the financial services, entertainment and
telecommunications industries, one intends to develop and operate port and
logistics facilities, one intends to acquire and develop a portfolio of wind
farms, one is an operator of privately owned jet aircraft and one designs and
manufacturers LED light engines and laser diodes modules
|
Oil & Gas /
Alternative Energy
(6)
|
Exploration and Production (4), one is a materials
discovery company and one is a renewable energy and cleantech investment
company
|
Technology (4)
|
One is a data center, one is a healthcare software and
related services provider, one is a provider of software applications for
drug and chemical development and one develops set-top boxes for the delivery
of Internet-based TV
|
Consumer Services
(4)
|
One is an online dating service, one is a franchisee of an
international pizza delivery company, one is a film production company and one
is a provider of mobile marketing solutions
|
Consumer Goods (3)
|
One produces palm oil, one supplies potatoes and one has
healthcare related technology that enhances the taste and mouth feel of
medicines
|
Healthcare (1)
|
This company has IP surrounding a variety of medical
applications
|
Revenue and income/loss figures for most of the companies
listing on London's AIM are not particularly meaningful given their early stage profiles. Of the 46 companies listing on the London Stock Exchange's AIM, 13 generated revenues
> £1 million during their most recent financial year with the range being £1
million - £156 million ($2 million - $250 million). Of those 13 companies listing on the London Stock Exchange's AIM, six were profitable;
two with small profits and four with ‘normal profits’. The average of the four with ‘normal profits’
was a trailing PE and EBITDA multiple of 13.47 and 8.49, respectively.
The most interesting aspect of the financial details of
these companies is that fact that those companies listing on London's AIM with meaningful levels of revenues and
profits are concentrated in just three of the eight London AIM super sectors. All four of the technology companies listing on London's AIM generated meaningful revenues and two of the four generated meaningful
profits. Three of the seven industrial
companies listing on the London Stock Exchange's AIM met the revenue test and one met the profits test. Two of the four consumer services companies
listing on London's AIM met the revenue test but none met the profits test.
Four of the 46 companies listing on London's AIM that completed IPOs on London's AIM during
2010 are dual listed on the Australian Stock Exchange with two utilizing the
Designated Markets Route (i.e. the fast track route) to London's AIM. An entirely different four companies were
previously admitted to and trading on the PLUS Stock Exchange (the old OFEX) in
the U.K. The two U.S. companies listing on London's AIM during 2010 remained domiciled in the U.S. and continue
to prepare their financial statements in accordance with U.S. GAAP. One of the two U.S. companies listing on London's AIM trades in the
U.S. over-the-counter on the Pink Sheets.
London AIM Geographic Dispersion (Main Place of Operation)
Unsurprisingly, the U.K. is the main place of operation for
more London Stock Exchange AIM-listed companies than any other country, region or continent. The U.K. is well represented in each of the
eight London AIM super sectors with between one and three companies. It is also unsurprising that Basic Materials
(i.e. mining) is the focus of many of the African companies listed on London's AIM. The only other significant concentrations are
Industrial companies listed on London's AIM in India and Consumer Services companies listed on the London Stock Exchange's AIM in Continental Europe.
