- 26 companies completed IPOs on AIM during H1 2016, a 13% increase from H1 2015
- 11 included meaningful liquidity events for selling shareholders
- £884 million ($1.2 billion) raised for IPOs during H1 2016, up 89% from H1 2015
- Selling shareholders raised £326 million ($434 million), a record 37% of the total
- Average IPO raised £34.0 million ($45.2 million), median £13.3 million ($17.7 million)
- At a cost of 7.0% and 10.8%, respectively, of gross funds raised
- 77% of IPOs raised between £7.5 and £100 million ($10 and $133 million)
- Average opening MC of £78 million ($104 million), median £47 million ($63 million)
- 88% of MCs between £10 million and £250 million ($13 million and $333 million)
- IPO dilution of existing shareholders amounted to 27%
- Average post-IPO free float of 37%
- Average and median share price return of 15% and 10% since IPO (median date 5/8/16)
- FTSE AIM All-Share Index fell 4% during H1 but only fell 2% from 5/8 - 6/30/16
- 18 of the 26 companies generated revenues > £2 million (range £3 million - £314 million)
- Median trailing pre-money revenue multiple of 2.12
- 8 of the 26 companies earned profits > £1 million (range £1 million - £27 million)
- Median trailing pre-money P/E ratio and EBITDA multiple of 29.48 and 8.39
- Industry and geographic dispersion and financial profile of the 26 companies - pages 5 - 7
- Detailed descriptions and insights into the 26
companies - pages 8 - 10
Number of IPOs
|
Gross Funds Raised
(in £ millions)
|
Average Funds
Raised
(in £ millions)
|
|
H1 2013
|
22
|
258
|
12
|
H2 2013
|
40
|
767
|
19
|
H1 2014
|
42
|
1,858
|
44
|
H2 2014
|
40
|
960
|
24
|
H1 2015
|
23
|
468
|
20
|
H2 2015
|
15
|
182
|
12
|
H1 2016
|
26
|
884
|
34
|
Total
|
208
|
5,377
|
26
|
The table on the previous page shows that after an 18-month bull market for AIM IPOs, 2015 was a year for the market to digest all of the new entrants. This is evidenced by the fact that £4.9 billion ($6.5 billion) was raised during 2015 for secondary offerings, the most since 2010.
The £884 million ($1.2 billion) raised for AIM IPOs during
the first half of 2016 represents an 89% increase from the first half of 2015
and a level comparable to the second half of 2013 and the second half of
2014. The average funds raised of £34
million ($45 million) matches the whole of 2014. Of particular note during the first half of
2016 is the fact that 11 of the 26 IPOs included meaningful liquidity events
for selling shareholders who raised £326 million ($434 million), accounting for
a record 37% of the total.
From a sectoral perspective, financials accounted for 19% of
AIM IPOs with two of the five being Investing Companies; one intends to invest
in industrial real estate and the other has a portfolio of investments in
consumer and enterprise technology, hardware and healthcare which it intends to
expand. Healthcare accounted for 15%
with three of the four AIM IPOs coming from the biotech sub sector and, of
particular note, only the U.S. company generated significant revenue. Pure play technology companies also accounted
for 15% of AIM IPOs. Three consumer
goods’ businesses completed IPOs on AIM for a 12% share as was the case for the
consumer services sector. Industrials
and utilities each accounted for 8% of AIM IPOs. Finally, the basic materials (i.e. mining)
and oil and gas sectors accounted for an aggregate of 11% of AIM IPOs during the
first half of 2016 with all three businesses being from outside the UK.
The chart below provides the distribution of gross funds
raised from AIM IPOs during the first half of 2016. The sweet spot for AIM IPOs is between £7.5
million and £100 million ($10 million and $133 million).
Of the aggregate gross funds raised, 63% was for the companies and 37% was for selling shareholders, which were present in 13 of the 26 IPOs, with 11 selling a meaningful equity stake. This is the highest relative level of selling shareholder activity ever recorded on AIM. While the average amount of gross capital raised was £34.0 million ($45.2 million), the median was only £13.3 million ($17.7 million).
The equation in the chart below can be used to predict the
cost of an AIM IPO with 85% confidence.
The 20 data points represent the gross funds raised and associated costs
for the non-Investing Company IPOs that raised at least £3 million ($4
million). Since these 20 companies raised
an average of £39.52 million ($52.56 million), the expected cost would be £2.62
million ($3.48 million) or 6.6% of the gross funds raised.
The average and median offering costs for all 26 AIM IPOs amounted
to 17.4% and 8.5%, respectively, of the gross funds raised, however, the
average, in particular, is skewed by a handful of relatively small IPOs where
the fixed costs dominate.
The chart below provides the distribution of opening market
capitalizations. The average company’s
opening market capitalization was £78 million ($104 million) whereas the median
was £47 million ($63 million). The sweet
spot for market capitalizations on AIM is between £10 million and £250 million
($13 million and $333 million).
The chart below illustrates the IPO dilution of existing shareholders over the last five-and-a-half years. As expected, dilution decreased coming into the 18-month bull market for AIM IPOs during the second half of 2013 and steadily increased through 2015 as IPO activity slowed to allow the market to digest all of the new entrants. Since AIM IPO activity picked up during the first half of 2016, dilution again decreased. This pattern occurs because favorable market conditions place companies in stronger negotiating positions with respect to valuation.
The chart below illustrates the IPO dilution of existing shareholders over the last five-and-a-half years. As expected, dilution decreased coming into the 18-month bull market for AIM IPOs during the second half of 2013 and steadily increased through 2015 as IPO activity slowed to allow the market to digest all of the new entrants. Since AIM IPO activity picked up during the first half of 2016, dilution again decreased. This pattern occurs because favorable market conditions place companies in stronger negotiating positions with respect to valuation.
The final chart in this section provides the distribution of
share price returns since each company completed its AIM IPO during the first
half of 2016 through June 30, 2016. It
should be noted that the median IPO date is May 8, 2016, therefore, the average
and median returns of +15% and +10%, respectively, only represent, on average,
the last 54 days of the first half of 2016.
As a point-of-reference, the FTSE AIM All-Share Index fell 4% during the
first half of 2016 but only fell 2% from May 8, 2016 through June 30, 2016;
therefore, the relative performance of the 26 IPOs has been quite strong. The average post-IPO free float was 37%.
Industry and Geographic Dispersion and Revenue and Profitability Profile
Revenue and
Profitability*
|
UK (20)
|
Italy (2)
|
U.S. (1)
|
Malaysia (1)
|
Egypt (1)
|
Malawi (1)
|
Totals (26)
|
Financials (5)
|
2 SR & SP
2 SR
1 Neither
|
2 SR & SP
2 SR
1 Neither
|
|||||
Healthcare (4)
|
3 Neither
|
1 SR
|
1 SR
3 Neither
|
||||
Technology (4)
|
1 SR & SP
1 SR
2 Neither
|
1 SR
& SP
1 SR
2 Neither
|
|||||
Consumer
Goods (3)
|
3 SR & SP
|
3 SR & SP
|
|||||
Consumer
Services (3)
|
1 SR & SP
2 SR
|
1 SR & SP
2 SR
|
|||||
Industrials (2)
|
1 SR & SP
|
1 SR
|
1 SR & SP
1 SR
|
||||
Utilities (2)
|
1 SR
|
1 SR
|
2 SR
|
||||
Basic
Materials (2)
|
1 Neither
|
1 Neither
|
2 Neither
|
||||
Oil & Gas (1)
|
1 SR
|
1 SR
|
|||||
Totals
(26)
|
8 SR & SP
6 SR
6 Neither
|
1 SR
1 Neither
|
1 SR
|
1 SR
|
1 SR
|
1 Neither
|
8 SR & SP
10 SR
8 Neither
|
* Significant
Revenues (SR) and Significant Profitability (SP) are defined as > £2
million and > £1 million, respectively.
|
|||||||
AIM-listed companies are organized into 90 sub sectors,
which feed into 40 sectors, which feed into 10 super sectors. During the first half of 2016, only one super
sector, Telecommunications, was not represented with an IPO. The first pie chart on the previous page
illustrates the relative number of AIM IPOs in each of the nine represented super
sectors. Since the classifications can
be deceptive, the table at the end of this newsletter on pages 8 - 10 provides some
detailed descriptions and insights into the individual companies.
From a sectoral perspective, financials accounted for 19% of
AIM IPOs with two of the five being Investing Companies; one intends to invest
in industrial real estate and the other has a portfolio of investments in
consumer and enterprise technology, hardware and healthcare which it intends to
expand. Healthcare accounted for 15%
with three of the four AIM IPOs coming from the biotech sub sector and, of
particular note, only the U.S. company generated significant revenue. Pure play technology companies also accounted
for 15% of AIM IPOs. Three consumer
goods’ businesses completed IPOs on AIM for a 12% share as was the case for the
consumer services sector. Industrials and
utilities each accounted for 8% of AIM IPOs.
Finally, the basic materials (i.e. mining) and oil and gas sectors
accounted for an aggregate of 11% of AIM IPOs during the first half of 2016
with all three businesses being from outside the UK.
The second pie chart two pages back shows the main country
of operation for the companies that completed IPOs on AIM during the first half
of 2016. Unsurprisingly, the UK is the
main place of operation for more AIM-listed companies than any other country. Approximately 63% of the 1,013 companies currently
listed on AIM are based in the UK.
During the depths of the global financial crisis in Europe, UK companies
only accounted for 31% of AIM IPOs from 2010 - 2012. The healing process that began in Europe in
2013, and took firm hold in the UK, triggered the start of an 18-month bull
market for AIM IPOs with UK company participation bouncing back to expected
levels, capturing 53%, 63%, 63% and 77% of AIM IPOs during 2013, 2014, 2015 and
the first half of 2016, respectively.
Of the 26 companies that completed AIM IPOs during the first
half of 2016, 18 (69%) generated significant revenues (i.e. > £2 million or
$3 million) during their most recent financial year with the range being £3 million
- £314 million ($4 million - $418 million).
The average trailing pre-money revenue multiple was 3.77 and the median
was 2.12. Of the 18 companies that generated
significant revenues, eight (44%) earned significant profits (i.e. > £1
million or $1 million), with the range being £1 million - £27 million ($1
million - $36 million). The average trailing
pre-money P/E ratio and EBITDA multiple for the eight companies that earned
significant profits was 31.21 and 10.92, respectively, and the medians were
29.48 and 8.39.
Of the 20 UK companies that completed AIM IPOs during the
first half of 2016, 14 (70%) generated significant revenues during their most
recent financial year. Of these 14 companies,
eight (57%) earned significant profits.
The comparative metrics for 2015 were 63% and 33%, respectively,
indicating that investors during the first half of 2016 wanted to see a little more
commercial traction and a majority of those companies earning significant
profits. Of the six companies from
outside the UK that completed AIM IPOs during the first half of 2016, four (67%)
generated significant revenues. Of these
four companies, none (0%) earned significant profits. The comparative metrics for 2015 were 50% and
71%, respectively, indicating that investors wanted to see more commercial traction
but are apparently willing to wait for significant profits, although, there
really aren’t enough data points to draw a firm conclusion.
The historically significant number of companies that
completed their AIM IPOs during 2015 via the ‘fast track route to AIM’ (5 of
38), wherein their securities were traded on an AIM Designated Market (ADM) for
at least the previous 18 months, did not continue during the first half of 2016
with no companies utilizing the fast track route. The fast track route to AIM had been rare; used
by only five of the 234 AIM IPOs from 2011 - 2014. Companies utilizing the fast track route do
not have to produce the typical AIM Admission Document but rather a brief, but
detailed, pre-admission announcement.
The 10 ADMs are the top tier markets of the ASX, Deutsche Börse Group,
Johannesburg Stock Exchange, NASDAQ, NYSE, NYSE Euronext, NASDAQ OMX Stockholm,
Swiss Exchange, TMX Group and UKLA Official List.
Likewise, no company that completed its IPO on AIM during the
first half of 2016 migrated to AIM from the UK’s ICAP Securities &
Derivatives Exchange (ISDX). From 2011 -
2015, 22 of the 272 companies that completed IPOs on AIM were previously listed
on the ISDX.
A couple of final points to note during the first half of
2016 are that one company simultaneously completed its IPO on AIM and the
Enterprise Securities Market of the Irish Stock Exchange (ESM) and two dual
listed on AIM from the TSX Venture Exchange (Toronto).
Financials
(5)
|
One is a UK property investment, development and
management company, one is a UK financial planning and discretionary wealth
management group, one is an Investing Company that intends to invest in
UK-based industrial and logistics properties and qualify as a REIT, one is a UK,
non-standard, consumer finance company that provides secured and unsecured loans
delivered directly to customers' homes with repayments collected in person
during weekly follow-up visits to customers' homes and one is an Investing
Company initiated by a venture capital firm’s existing portfolio of consumer
and enterprise technology, hardware and healthcare investments across the UK,
Republic of Ireland and Continental Europe which it intends to expand
|
Healthcare
(4)
|
One is a UK specialty pharmaceutical company with an
approved treatment for iron deficiency anemia in patients with inflammatory
bowel disease and a late-stage treatment for iron deficiency anemia and systemic
phosphate accumulation, otherwise known as hyperphosphatemia, related to
chronic kidney disease, one is a U.S.-based developer and supplier of cell
engineering technology to biotechnology and pharmaceutical firms engaged in
cell therapy, drug discovery and development, biomanufacturing, gene editing
and immuno-oncology that has developed a proprietary, high performance, flow
electroporation platform which enables rapid, consistent, large scale,
commercial and clinical grade cell engineering via an established regulatory
path, one is a UK-based early cancer detection company, with significant
operations in the U.S., that has pioneered the development of autoantibody
(an antibody raised in response to an abnormal host molecule) tests that have
the potential to detect cancer up to four years earlier than other methods
and can be applied to a very wide range of solid tumor types (lung, liver and
ovarian in particular) and one is a UK specialty biopharmaceutical company
focused on rare and specialty diseases that selectively acquires
clinical-stage product candidates with demonstrated clinically meaningful
data from large pharmaceutical companies and jointly further develops these
product candidates to subsequent key value inflection points or to
commercialization
|
Technology
(4)
|
One is a London-headquartered provider of carrier-grade,
enterprise billing and CRM software, supporting fixed wire, mobile, broadband
and TV communications service providers with customers in Europe (22), the
Americas (35), Asia Pacific (12) and the Middle East and Africa (6) with half
of its staff based in India, one is a UK supplier of enterprise-grade robotic
process automation software via a virtual workforce powered by software robots
that are trained to automate routine, back-office, clerical tasks (i.e. manual,
rules-based, administrative processes), creating a more agile, cost effective
and accurate back-office, one is a UK cybersecurity software provider that
protects critical IT assets, infrastructures and devices by preventing targeted
cyberattacks from directly accessing privileged accounts, removing unnecessary
access and powers of privileged account users, deterring legitimate
privileged account users from abusing their roles and containing the effects
of a breach if one does happen and one is a UK firm that has developed
software to track and assess physical literacy in schools and performance in
sports for both participants and organizations where their growing data
repository regarding age, socioeconomic status, disability, ethnicity, post
codes, personal activity and progression could be of interest to a variety of
government departments, including the National Health Service, education
bodies, insurance companies and commercial sports organizations
|
Consumer
Goods
(3)
|
One is a UK developer and constructor of multi-occupancy
properties focused on student housing with plans to expand into privately
rented housing, one is a UK manufacturer of premium chocolate and
cocoa-related products that also owns a cocoa plantation in Saint Lucia that
is the source of rare cocoa used in the company’s super premium range with
all products sold directly to consumers online and through a network of 84
stores in the UK and overseas and one is a UK manufacturer of company branded
and private label toilet rolls, kitchen rolls, facial tissues and other tissue
products
|
Consumer
Services
(3)
|
One designs and sells company branded lifestyle clothing,
accessories and homewares from 94 stores across the UK and the Republic of
Ireland, sells wholesale to major UK retailers and has a growing
international presence in North America and Germany through wholesaling, with
an ecommerce platform that is tailored for the domestic and each
international market, one is a London-headquartered (327 employees; 186 in
the UK, 101 in the U.S., 21 in Portugal and 19 in France) multiplatform media
and ecommerce business with a global content distribution network comprising
magazines, online, mobile apps, mobile web and a physical presence via live
events, all which seek to inspire and enable people to experience the best of
a city, serving as a guide for food, drink, music, theatre, art, style,
travel and entertainment with operations in 65 cities across 14 countries and
a presence in a further 42 cities across 25 countries and territories through
international licensing arrangements and one owns and operates 15 Lebanese
and Eastern Mediterranean restaurants in the Greater London area and
Manchester
|
Industrials
(2)
|
One is an Italian company that designs, builds,
transforms, owns and/or operates high efficiency Combined Heating Plants with
annexed District Heating distribution networks, providing heat to communities
of up to 50,000 people and producing electricity that is sold to wholesalers
and fed into the national power grid and one is a specialist audiovisual and
document solutions distributor with operations in the UK, Ireland, France,
Germany and Australasia that sells large format displays, projectors, digital
signage and printers to audiovisual integrators and IT resellers serving the corporate,
education, retail, residential and hospitality sectors
|
Utilities
(2)
|
One supplies gas and electricity to SMEs in the UK and the
other is a Malaysian company that generates power from biogas captured
through the treatment of Palm Oil Mill Effluent which is positioning itself,
through its subsidiaries and associated companies, to be an independent power
producer via the construction, operation and ownership of biogas power plants
that will provide electricity to the Malaysian National Grid and also provides
its expertise as an engineering, procurement, construction and commissioning contractor
to palm oil mill owners in the construction and management of biogas power
plants at the mill owners’ sites
|
Basic
Materials
(2)
|
One is an Italian producer and supplier of graphene-based
products that has created a range of graphene products, in powder, paste and
liquid form that are used by its customers in a wide range of applications
including bicycle tires and wheels, mobile decontamination units for tackling
environmental emergencies and sportswear; ski jackets, ski suits, technical
underwear and a polo shirt and the other holds two rare earth deposit
prospecting licenses in the southern part of Malawi and plans to secure
additional rare earth element and other mineral opportunities in Malawi and
elsewhere in Africa
|
Oil & Gas
(1)
|
This company is an exploration and production company with
production in Egypt and development assets in the Gulf of Suez, the Nile
Delta and Cameroon
|
