Looking back at AIM's performance in 2009, (See: Is AIM on the way back up?) I speculated in January this year that an element of stability might be returning to AIM and that there was a quickening of interest in new companies coming to the market. The first quarter of 2010 supports that to a degree but the market's performance continues to be patchy and the Exchange's statistics throw up one or two particularly interesting facts.
As before, many more companies are leaving the market than are joining, although the flow seems to be slowing down, with 50 companies leaving the market in the first quarter compared with 75 in the same period last year and 293 in the whole of 2009. The majority of those departing continue to be delistings at the company's request, suggesting that there is still a substantial body of companies who question whether the benefits to them of being traded on AIM justify the costs of maintaining their AIM status. At the end of March AIM companies totalled 1020, the lowest since 2005 and, with around a quarter of the current crop of companies having market caps of less than £4 million, it seems sadly inevitable that the flow of delistings is unlikely to dry up dramatically.
Set against that there is at least some more tangible evidence that investors are relaxing the purse strings a little on IPOs (although, curiously, the opposite seems to be happening in relation to further funding of existing companies). The market has seen 9 IPOs in the first quarter of 2010, which while hardly a number to quicken the pulse of the advisory community, is already equivalent to 60% of the total number of new listings last year and compares with the grand total of one in the same period in 2009. Funds raised on new issues and re-admissions reflect this increase in activity - £242 million compared to £740 million in the whole of 2009 – but in marked contrast to previous years, secondary fundings have fallen. Apart from the dramatic fall between 2007 (£9.6 billion) and 2008 (£3.2 billion) secondary fundings have increased year on year since 2002. But in the first quarter of 2010 they totalled only £694 million, which, while more than the £561 million raised in the same period in 2009, does suggest that the market may struggle to reach the total of £4.8 billion in secondary financings raised in 2009.
Reflecting their performance on other exchanges, the mining and oil & gas sectors have continued their relative dominance on AIM. Looking at the change over the last twelve months, it is interesting to note the increasing numbers of companies in both sectors in the largest 20 companies. The 4 mining companies in the list a year ago have doubled to 8 and the number of oil & gas companies has increased from 2 to 5. The position of the oil & gas companies is highlighted by the fact that the capitalisation of some of the largest such companies has increased many times over – Bankers Petroleum, at 31 March 2010 AIM's largest company, is now capitalised at £1.3 billion, having increased from £203 million a year ago, and Indus Gas has increased from £210 million to £929 million over the same period. The total capitalisation of the two sectors increased dramatically over the last twelve months, with mining companies going from £5.3 billion to £10 billion, and oil & gas companies from £4.7billion to £11.8 billion.
The rise of the oil & gas companies is shown even more markedly in the turnover statistics for Q1 2010, where out of a total market turnover of £7.5 billion, almost a third (£2.4 billion) was represented by dealings in this sector. Mining companies held their own, with £1.1billion of turnover, up from £993 million in the same period last year.
The oil & gas turnover and market capitalisation figures include the relatively new subsector of "Alternative Energy", introduced in August 2009 and for which separate data were therefore not available for Q1 2009. Certain of the companies in this subsector previously appeared in other sectors such as Electrical Components and Equipment such as the largest company in the subsector, Renesola, now capitalised at £325 million. The establishment of alternative energy companies as a separate subsector will doubtless prove to be a helpful tool in analysing the growth of a sector which has the potential to generate a great deal of interest in coming years, whether companies are focused on UK or global opportunities.
Inevitably other sectors fared less well. While the total market capitalisation of the pharmaceutical and biotech sector, for example, has risen from £1 billion to £1.6 billion in the past year (despite the number of companies in the sector falling from 57 to 41), the funds raised for such companies in the first quarter of 2010 totalled only £32.8 million (of which £15 million was raised in a single issue by Silence Therapeutics) which suggests that the sector is, at best, on track to equal its performance in 2009 when £132 million was raised in the full year.
So AIM can look back on a very patchy performance in the year so far with certain sectors dramatically outperforming the rest of the market. But with at least 6 new issues in April, and several more slated for May, it is to be hoped that by the end of the first half of 2010 a generally more consistent and optimistic picture will be emerging.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.