There are now facts and figures (rather than just after-dinner chatter between Corporate Financiers discussing their Q1 / 2 pipeline) which detail the success of the AIM market in 2013. According to UHY Hacker Young’s latest AIM report:
- £881m raised (70% increase on 2012)
- 56 companies joined
- 25% fewer companies left (delisting or insolvency) than 2012. It is widely considered that the Alternative Investment Market is now competing with the FTSE main markets in terms of generating returns for investors.
What has changed to drive this growth?
Have increased regulatory sanctions aligning AIM companies corporate governance with those of the main market shed its reputation as the wild-west of exchanges? Perhaps the government’s effort to facilitate SME innovation, such as “patent box” tax breaks for biotech companies, have captured the imagination of investors? Or has the inclusion of AIM stocks in ISAs provided a fresh incentive?
Journalist David Prosser looks to another veritable driver as he questions whether the audience that AIM appeals to may be responsible for the ever-improving performance. AIM is a market of opportunity for “ordinary investors” to pick out overlooked and undervalued stocks that institutional investors have missed.
Whilst realistically the answer lies in the healthy combination of all these factors, there is one integral (and often undermined) point that has changed:
The maturity of companies coming to market
Maturity does not just equate to the amount of years a company has existed, but it can also be quantified in terms of wisdom and forward thinking; in other words, how thoroughly did the company anticipate and plan an eventual exit.
Companies are beginning to consider their exit from inception… they are not only concerned with profit margins, but also considerations such as working cost of capital and the maintenance of growth. They want to create the optimum final valuation of a well-structured Company that has water-tight Corporate Governance. These factors give investors more confidence upon entry into the public domain and later in the secondary market.
The investment story
The increased maturity of companies is also reflected by their decision to consider financial PR at an earlier stage during the IPO process. Companies are realising that their investment story cannot be created last minute. An integrated communication strategy should be prepared to position the company correctly to key audiences and manage market expectations of their stocks at an early stage. Some of the most successful IPOs of 2013 have proven the virtuous circle of commitment that exists between investment in PR, IR and share price.
An Abchurch client, SyQic, the fast growing OTT provider of live TV and on-demand paid video content across mobile and internet enabled consumer devices, demonstrated a successful flotation when it’s shares soared 30% on it’s first day of dealings following an over subscribed road show thanks to a well communicated investment story.
Return to the status-quo
Many in the City are now looking ahead to 2014 with eager anticipation. What exciting, profitable and increasingly international companies are going to debut on the London junior market in 2014? The answer, in all likelihood, is many. And yes, there will be some that falter, but we must remember that this was the case pre–2008 too. The existence of one or two non-starters does not indicate the existence of a so called bubble in London markets, but rather a return to the natural status-quo. But as David Prosser pointed out, the AIM market is now a more dominant force and will continue to go from strength to strength.
Stephanie Watson
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