Analysis of the AIM market by Deloitte, the business advisory firm, has shown a continuing exodus from AIM but the rate of flight is slowing markedly. However, there has been a marked increase in companies making the move up from AIM onto the Main Market, over the past two years.
John Hammond, capital markets partner at Deloitte, commented: “AIM has had a pretty bad rap in the past 18 months but there are strong signs that at the top end of the market AIM has been successful in doing what it set out to do. While there has been a considerable fall out at the bottom end of the market – unsurprising following the over exuberance to join AIM at the height of the market, resulting in too many poor companies jumping on the bandwagon – at the top there is a steady and growing number of companies whose success on AIM has proved a springboard to move up to the Main Market.”
The number of companies leaving AIM increased from 210 in 2007 to 258 in 2008, and 178 to July 31 this year, a trend which has caught the eye of most commentators. However, the number of companies leaving AIM to join the Main Market has increased from three in 2006 to eight in 2007 and 11 last year. Although the numbers are small by comparison, these are sizeable companies and as a percentage of companies listing on the Main market, those moving up from AIM have increased significantly. In 2006, 4% of all companies listing on the Main Market were joining from AIM; in 2007 this increased to 11% and by 2008 had reached 21%.
In 2009, so far there have been only four (out of nine new admissions) move ups, but Hammond expects that number to increase: “There are a number of other AIM to Main move ups currently in progress and, while they may not all occur this year, the trend is pretty clear. Most of the activity is in the oil and gas and mining sectors, where improving oil and commodity prices have meant many of these companies are either outgrowing AIM or want the added lustre of a Main Market listing.
“Many of these companies originally listed on AIM because they didn’t meet the criteria for a listing on the Main Market. With the benefit of the money from the original AIM IPO and the relative ease of raising secondary funds on AIM these companies have now matured to a point where they can step easily onto the Main Market and in many cases into the FTSE indices. To that extent, AIM is doing its job.”
Of course part of the driver to move from AIM may be less positive. Hammond commented: “Arguably, part of the rationale of moving to the Main Market is that AIM still struggles to provide liquidity, at least at the lower end of the market. Nonetheless, whether the reasons are positive or negative, we expect the current trend to continue.”