The latest ‘Taking AIM' survey by international law firm Faegre & Benson and accountants Baker Tilly shows that the reputation of AIM has been restored over the last 12 months and supports the notion that smaller cap companies should be at the heart of the economic recovery.
Following the delisting of almost 300 companies from AIM, including many of its smallest participants, the market has emerged as a streamlined but significantly stronger entity. The survey shows that whilst the AIM population at 31 December 2009 was below 1300 for the first time in many years, the average value of an AIM company at that date stood at £44 million, compared with only £24 million at the end of 2008. By the end of last year, the AIM All-share index was up by 66%, recovering the losses of 2008 and outperforming most other markets.
Secondary fund raisings increased from £3.2 billion in 2008 to £4.8 billion in 2009, confirming AIM's durability and its key role for companies advancing beyond their infancy and seeking to develop further. This has been supported in this year's budget, with the Government announcing plans to consult on allowing AIM shares to be eligible for inclusion in ISAs and on the possible relaxation of the VCT rules to make it easier for VCTs to invest in small cap companies.
In his foreword to the survey, Marcus Stuttard, Head of AIM, heralds an investment in AIM as "one in the real economy", with over 1,000 UK-incorporated AIM companies today employing some 260,000 people. The well-being of SMEs is also at the forefront of EU economic policymaking with the implementation of the Small Business Act for Europe (SBA) to strengthen small companies' potential to create jobs in the EU and to promote their competitiveness both within the Single Market and in the global markets.
In spite of the recession, nearly three quarters of those companies who were admitted to AIM before the current economic downturn say that, even if they had known about it, they would still have listed. Most of these companies have stayed on AIM because of the access to capital and to institutional investors listing brings.
The survey reveals that a majority of both institutional investors (63%) and AIM companies anticipate an improvement in AIM's performance over the next 12 months, with many expecting a full recovery in market valuation and levels of activity.
Two thirds of the UK AIM companies surveyed say that they have considered or would consider AIM for further funding in the next 12 months. This is particularly the case for higher cap companies (£50 million or more) and reflects the continuing importance of equity capital for funding at a time when other sources of finance may continue to prove less accessible.
Moving forward, investors favour resources (37%) followed by technology (33%) as the most attractive stocks on AIM over the next 12-24 months. Perhaps because of a sense that the UK recovery may be slower than that of certain other countries, overseas companies and UK businesses with strong earnings from overseas may also be at some advantage.
Melanie Wadsworth, Corporate Partner at Faegre & Benson, said of this year's survey: "I am delighted to see the results of this year's survey confirm that AIM has weathered the economic storm to emerge stronger than ever. By providing access to capital for its existing companies when times were tough, and other funding options were few and far between, AIM has come of age and proved that it is more than just an IPO market. The contribution of SMEs to the economy should not be underestimated; helping smaller, dynamic companies to realise their growth and innovation potential will be key to kick-starting economic recovery in the UK and AIM has an important role to play in that."Baker Tilly's Head of Capital Markets, Chilton Taylor, said: "One notable success revealed by this year's survey is the support that institutions have given to well-managed companies on AIM, even while the markets were having a difficult time. Some 300 companies left AIM last year, although the majority of these had a market capitalisation of less than £5 million thus leaving the market smaller but stronger. The market has shown itself to be an excellent source of secondary funding and we expect that to continue."