AIM Experiences Positive 2010
Friday, May 06, 2011

Despite a year of continued economic hardship and investor caution, the latest annual Taking AIM survey, conducted by Baker Tilly, reveals improved positive sentiment surrounding listing on, and investing in, the Alternative Investment Market (AIM) index, operated by the London Stock Exchange.

AIM is unique in that it has historically provided smaller businesses the opportunity to raise capital, however such investments are generally seen as being more risky, albeit with higher returns that typical investment in blue chip companies. Companies listing on AIM benefit both from less onerous regulatory requirements and tax incentives.

The salient findings in Bakey Tilly's 15th annual Taking AIM survey are that:

• The vast majority of current AIM-quoted companies (71%) support the market, saying that, if they had known about the recession, they would still have joined;
• 80% of investors said AIM’s performance during the year had a positive effect on their own fund’s performance;
• 80% of AIM companies say they have seen some benefit from the access to capital their listing provides, with 48% considering this to be a major benefit;
• 56% of AIM companies said they had considered, or were considering, AIM for further fundraising in the next 12 months.

Chilton Taylor, Head of Capital Markets at Baker Tilly, commented on the findings:

“Much of the investor interest was in secondary issues, with funds raised at their highest level since 2007, confirming investors’ faith in the market and their continuing support for its companies. However, with growing confidence, there was renewed IPO activity, particularly in the last quarter of the year. The investors in our survey considered that this represented a sustainable recovery in the IPO market, albeit only for selective cases and specific sectors, although a few were still looking for this to be built on in 2011 in order to provide real evidence of recovery.”

"Whilst the recession has seen a number of lower-quality and smaller AIM companies delisting, the pace of departures from the market slowed in 2010. The companies that remain on AIM are, in the main, still happy with their position."

Many AIM companies are seeing improved performance and some easing of the pressures they have faced during the downturn. However, there are signs that some of the smaller AIM companies continue to be under pressure. While half (52%) of the larger companies by market capitalisation (over GBP50m) said that their own company’s share price had outperformed the market overall in 2010, a similar proportion of the smaller companies (market cap up to GBP20m) felt that they had underperformed the market.

Although raising funds remains the main pressure on the successful operation of their business, this was mentioned less frequently this year by those in the survey (28% vs. 45% in 2010). However, it remains an issue for many of the smaller AIM companies (44% of those with market cap of up to GBP20m, compared with only 20% of those with higher market cap).

Taylor explained the context surrounding the survey results:

“AIM bounced back in 2010 with its index increasing by 43% whilst the FTSE 100 only increased by 9%. Secondary fundraisings held up well at GBP5.74bn (GBP4.86bn in 2009) demonstrating the maturity of AIM as a growth company market with considerable support by investors for existing listed companies.”

“However, whilst IPOs increased significantly to 47 (13 in 2009), underpinned by 26% in the resources sector, this level is still a far cry from 2006 when there were 326 IPOs. Only the very best companies were able to enter into an IPO as institutional investors often with reduced funds available preferred to support their existing portfolio companies or seize opportunities with other companies already listed.”