IPO activity on the London Stock Exchange's AIM increased slightly
during the first half of 2012 with 22 IPOs on London's AIM, two of which have their main place
of operation in the U.S. Gross capital raised on London's AIM amounted to £200 million
($320 million).
The median trailing pre-money revenue multiple
achieved by the companies listing on London's AIM was 2.19 for the 12 companies that generated revenues > £2 million.
The median trailing pre-money P/E ratio and EBITDA multiple achieved by the companies listing on London's AIM was 9.38 and 6.32,
respectively, for the 10 companies that earned profits > £1 million.
This post provides some insight into each of the 22 companies listings 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 increases slightly - 22 listings on London's AIM during H1
2012 compared to 19 listings on London's AIM during H1 2011
- Companies
completing IPOs on London's AIM since 2010 are smaller but stronger
- £200 million ($320 million) raised for IPOs on London's AIM in H1
2012 (£1.5 billion for secondaries)
- London Stock Exchange AIM IPO market remains selective, therefore,
prospective issuers should carefully consider:
- Average London AIM IPO raised £9 million ($14 million)
- 82% of London AIM IPOs raised between £3 million and £30
million ($5 million and $48 million)
- Average opening market capitalization upon listing on London's AIM of £37 million
($59 million)
- 73% of opening market caps upon listing on London's AIM between £10 and £150
million ($16 and $240 million)
- London Stock Exchange AIM IPO
dilution of existing shareholders amounted to 28%
- Average and median share price return on London's AIM of 24% and
7% since London AIM IPO (median date 4/23/12)
- FTSE AIM All-Share Index fell 3% during H1 2012 and
13% from 4/23 - 6/30/12
- Average
post-IPO free float on London's AIM of 52%
- 12 of the 22 companies listing on London's AIM generated revenues >
£2 million (range £2 million - £124 million)
- Median
trailing pre-money revenue multiple of 2.19
- Those
w/o significant revenues broadly in the natural resources space or financials
- 10 of the 22 companies listing on the London Stock Exchange's AIM earned profits > £1
million (range £1 million - £23 million)
- Median
trailing pre-money P/E ratio and EBITDA multiple of 9.38 and 6.32
- Industry dispersion and insight into the 22
companies listing on London's AIM below
- Geographic dispersion and related commentary on the 22 companies listing on London's AIM also below
|
Number of
London AIM IPOs
|
Gross Funds Raised
(in £ millions)
|
Average Funds
Raised
(in £ millions)
|
H1 2010
|
16
|
351
|
22
|
H2 2010
|
30
|
666
|
22
|
H1 2011
|
19
|
265
|
14
|
H2 2011
|
26
|
295
|
11
|
H1 2012
|
22
|
200
|
9
|
Total
|
113
|
1,777
|
16
|
The table above shows that IPO activity on
London's AIM during the first half of 2012 was slightly stronger than during the first
half of 2011 in terms of the number of companies listing on London's AIM, however, slightly weaker in
terms of capital raised on London's AIM.
Looking across
the last five half-years, it is easy to spot the second half seasonality for London Stock Exchange AIM
IPOs, which QE2 exacerbated during 2010.
Generally speaking, since 2010, companies listing on London's AIM have been smaller
and stronger and have simply required less growth capital.
Despite the relatively weak macroeconomic situation, the
Secondary Offering market on London's AIM has been booming with £1.5 billion ($2.4
billion) raised during the first half of 2012 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 AIM 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.
The types of companies that completed London AIM IPOs during the first
half of 2012 generally fell into three categories; those with significant
revenues and significant profits, or very close to profitability, Investing
Companies seeking to acquire or invest in companies/assets and natural resource
plays at a very nascent stage. Investing
Companies listed on the London Stock Exchange's AIM are typically backed by ‘known figures’ with a history of achieving returns. The oil and gas and mining companies listed on London's AIM all had
owned or identifiable assets, solid geological studies and exceptional
management teams with track records of success.
The chart below provides the distribution of gross funds
raised from London AIM IPOs. The sweet spot for
London AIM IPOs is between £3 million ($5 million) and £30 million ($48 million).
Of the aggregate gross funds raised on the London Stock Exchange's AIM, 95% was for the
companies listed on London's AIM and 5% was for selling shareholders, which were present in four of
the London AIM IPOs, although, only three sold a meaningful stake. While the average amount of gross capital
raised on London's AIM was £9 million ($14 million), the median was £7 million ($11 million).
The average and median offering costs on London's AIM amounted to 20% and
13%, respectively, of the gross funds raised on the London Stock Exchange's AIM, however, the average, in
particular, is skewed by a number of relatively small London AIM IPOs where the fixed
costs dominate.
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 £37 million ($59 million) whereas the median
was £29 million ($46 million). 73% of
the companies listing on the London Stock Exchange's AIM commanded opening market capitalizations that ranged from £10
million to £150 million ($16 million to $240 million).
The aggregate opening market capitalization of the 22
companies that completed IPOs on London's AIM during the first half of 2012 was £0.8 billion
($1.3 billion). The average and median post-IPO
free float of these companies listed on the London Stock Exchange's AIM was 52% and 47%, respectively.
The chart below highlights an
interesting, and what will likely be a permanent, shift in the market with
respect to London Stock Exchange AIM IPO dilution of existing shareholders.
There are two main reasons for this shift;
one regulatory and the other macroeconomic.
The regulatory reason is the London Stock Exchange’s codification of the
AIM Nominated Advisers (Nomads) Rules in 2007, which 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 listing on London's AIM.
The macroeconomic reason is the global financial crisis, which has
caused London AIM investors to become more risk adverse.
Consequently, the quality of the companies listing on London's AIM has
increased and, as a result, the London AIM IPO dilution of existing shareholders has
decreased.
The 30% - 35% dilution level
appears to have seen a step-change downward to the 25% - 30% range.
2009 is viewed as an anomaly given the lack
of London Stock Exchange AIM IPO activity.
For the London AIM market as a whole, the average and median dilution of
existing shareholders was 38%, whereas when Investing Companies are excluded,
it was and 28% and 19%, respectively.
The final chart in this section provides the distribution of
share price returns on London's AIM since each of the 22 companies listed on London's AIM
through June 30, 2012. It should be noted
that the median London AIM IPO date is April 23, 2012, therefore, the average and median returns
on London's AIM of +24% and +7%, respectively, only represent, on average, the last 68 days of the
first half of 2012, the weakest part of the half-year for the overall market. As a point-of-reference, the FTSE AIM
All-Share Index fell 3% during the first half of 2012 and 13% from April 23,
2012 through June 30, 2012; therefore, the relative aftermarket performance of
the 22 London Stock Exchange AIM IPOs has been quite strong.
London AIM Industry Dispersion and Revenue and
Profitability Profile
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 the first half of 2012 were Telecommunications and
Utilities. The chart below illustrates the
eight super sectors in which London AIM IPOs occurred during the first half of 2012. Since the classifications can be deceptive,
the table below the chart provides some insight into the individual companies.
Financials (5)
|
One intends to invest in or acquire multi-level marketing
companies, one is a residential housing rental franchisor, one intends to
make equity or debt investments in companies where the owner(s) require
liquidity and/or obtain limited partnership interests in private equity funds
that are being repositioned, in both cases at discounts to intrinsic value,
one intends to invest in mining and oil and gas assets and one intends to
acquire a company, business, group of businesses or asset(s) in the natural
resources or consumer goods sector
|
Oil & Gas /
Alternative Energy
(4)
|
Oil & Gas Exploration and Production (2), one is
focused on onshore and offshore oil and gas and the other is focused on oil
sands
Renewable Energy Equipment (1), an environmental
technology company specializing in the development and application of green energy
and energy efficient water heating solutions, primarily through the
manufacture and sale of solar-powered water heating systems
Oil & Gas Equipment and Services (1), a provider of
specialist reach and recovery products and technologies (used in non-vertical
drilling for oil and gas to optimize production efficiency) to the
international upstream (exploration and production) oil and gas services
market
|
Consumer Services
(3)
|
One produces and commercializes children’s CGI animation
television series’ and brand’s based on sports and sport’s stars, one
provides portable accommodation, using steel shipping containers as the
form-factor, and does not require mains service, such as power, water and
waste drainage, for short-term events (motor racing, horse racing, golf,
tennis, sailing, music festivals, country shows and cultural events) and
longer-term uses (military deployments and civilian construction projects)
and one is a Feng Shui consultancy to corporations and individuals with
company-owned and franchised retail outlets
|
Basic Materials (3)
|
Mining Exploration and Production (2), one is focused on
gold and copper and the other is focused on iron ore and tin
Mining Services (1), a vertically integrated mining
services group that separates, refines and sells rare earth elements with a smelting
and separation plant, a rare earth elements’ sales and distribution company
and the ability to provide technical support and equipment to third-party
rare earth elements’ mining companies and factories
|
Technology (2)
|
One is a provider of collaboration software to the
software development industry, allowing globally distributed software
engineering teams to simultaneously access the same programs, improving
productivity and preventing downtime and data loss and the other is a
provider of software solutions and services to the automotive dealership
industry with dealer management, business intelligence and customer and
vehicle relationship management products
|
Consumer Goods (2)
|
One is an online and mobile, social/casual, interactive
games developer and publisher and the other is a designer, manufacturer and
supplier of company-branded sport’s shoes and designer and supplier of
company-branded clothing and accessories, all of which are sold at distributor
or sub-distributor owned stores
|
Industrials (2)
|
One is an independent utility cost management consultancy
that has established relationships with major energy suppliers and provides
services to its customers so that they can achieve better value from their
energy contracts, reduce their energy consumption and reduce their carbon
footprint and the other is a B2B e-commerce service provider that connects
international buyers with high-quality manufacturers that have been
independently audited for quality standards
|
Healthcare (1)
|
This company enables research into viral infections and
enables pharmaceutical companies to accelerate and reduce the cost of
bringing antiviral therapeutics and vaccines to market by isolating
volunteers in a specialist facility for 10 - 15 days, exposing them to a
characterized respiratory virus, treating them with an experimental drug
candidate or simply observing them and collecting samples and recording data
as to the effectiveness of the drug
|
Of the 22 companies listing on London's AIM, 12 generated significant revenues (i.e.
> £2 million) during their most recent financial year with the range being £2
million - £124 million ($3 million - $198 million). The average pre-money revenue multiple achieved by London Stock Exchange AIM-listed companies was
3.19 and the median was 2.19. Of the 12
companies listing on London's AIM that generated significant revenues, 10 earned significant profits
(i.e. > £1 million), with the range being £1 million - £23 million ($2
million - $37 million), and the other two recorded small losses (i.e. < £1
million). The average pre-money P/E ratio
and EBITDA multiple achieved by London Stock Exchange AIM-listed companies was 12.12 and 8.83, respectively, and the medians were 9.38
and 6.32.
As previously noted, the types of companies that listed on London's AIM during the first half of 2012 generally fell into three categories; those
with significant revenues and significant profits, or very close to
profitability, Investing Companies seeking to acquire or invest in
companies/assets and natural resource plays at a very nascent stage. As such, only one of the five financial
companies listed on the London Stock Exchange's AIM generated significant revenues and earned significant profits (the
residential housing rental franchisor listed on London's AIM), only two of the four oil and gas /
alternative energy companies listed on London's AIM generated significant revenues and earned
significant profits (the renewable energy equipment company listed on the London Stock Exchange's AIM and the oil
equipment and services company listed on London's AIM but neither of the oil and gas E&P companies listed on London's AIM)
and only one of the three basic materials companies listed on the London Stock Exchange's AIM generated significant
revenues and earned significant profits (the mining services company listed on London's AIM but
neither of the mining E&P companies listed on London's AIM).
Across the other super sectors, only consumer services
stands out with only one of the three companies listed on London's AIM generating significant revenues
and earning significant profits.
Both of
the technology companies listed on the London Stock Exchange's AIM generated significant revenues but only one earned a
significant profit with the other one recording a small loss.
Both of the consumer goods companies listed on London's AIM and both
of the industrial companies listed on London's AIM generated significant revenues and earned
significant profits.
The
healthcare company listed on London's AIM generated significant revenues but recorded a small loss.
One of the 22 companies listed on London's AIM was able to complete its London AIM IPO by using
the ‘fast track route to London's AIM’ since its securities were, and still are, traded
on a London AIM Designated Market (ADM), the Australian Securities Exchange (ASX) in
this case, for at least the previous 18 months.
So as to place this in the proper context, none of the 45 London AIM IPOs
during 2011 and only two of the 46 London Stock Exchange AIM IPOs during 2010 utilized the fast track
route, both with the ASX as the ADM.
Companies
utilizing the fast track route to London's AIM do not have to produce the typical London
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.
It appears as if the migration of companies to the London Stock Exchange's AIM from the
PLUS Stock Exchange (the old OFEX) in the U.K. has come to an end with none of
the 22 companies that completed IPOs on London's AIM during the first half of 2012 having
previously been listed on PLUS, whereas nine of the 45 London AIM IPOs during 2011 and
four of the 46 London AIM IPOs during 2010 were of companies that were previously
listed on PLUS.
The two U.S. companies that listed on London's AIM during the
first half of 2012 did so via U.K. domiciled holding companies that acquired
these U.S. companies with the London AIM IPO funds raised.
As U.K.-domiciled companies, they must prepare their financial
statements in accordance with IFRS; however, both continue to use the USD as
their reporting currency.
London's AIM Geographic
Dispersion (Main Place of Operation)
Unsurprisingly, the U.K. is the main place of operation for
more companies listed on London's AIM than any other country, region or continent; however, the
dominance of U.K. companies listed on London's AIM has continued to shrink in recent years. While approximately 60% of the 1,100
companies listed on London's AIM are based in the U.K., only 31% of London Stock Exchange AIM IPOs during 2010
and 2011 and 27% during the first half of 2012 were for U.K. companies. The irony here is that of the six U.K.
companies that completed London AIM IPOs during the first half of 2012, only two generated
significant revenues and earned significant profits, two generated significant
revenues and recorded small losses and the final two did not even generate
significant revenues, whereas the bar is higher for Chinese and U.S. companies listing on London's AIM.
The three Continental European companies listing on the London Stock Exchange's AIM followed the
same pattern as the U.K. companies listing on London's AIM in that only one generated significant
revenues and earned significant profits and the other two did not even generate
significant revenues.
All four Chinese companies listing on London's AIM generated significant revenues
(£26 million, £14 million, £124 million and £4 million) and generated
significant profits (£5 million, £4 million, £23 million and £1 million).
There were no industry sector concentrations amongst the
U.K., Continental European, Chinese or U.S. companies that completed IPOs
on London's AIM during the first half of 2012, however, the seven London AIM IPOs from the other five jurisdictions
were mainly for Investing Companies or natural resource plays.
