When the banks say NO, is AIM the alternative to raising cash in 2013?
In the years pre 2006 many growing SME’s used a flotation on AIM as strategy to raise investment capital and as a longer term exit route for existing shareholders. As the recession kicked in, and companies battened down the hatches the profile of AIM somewhat diminished as did the number of companies lining up to join the market.
AIM hit a low when throughout the whole of 2009 only 36 new companies joined the market, the lowest number on record. However, 2012 saw this figure nearly double, and the average number of daily trades undertaken on AIM reached an all-time high last year.
The companies already listed on AIM have continued to raise investment capital even throughout the darkest days of the recession. For example in 2012 companies on AIM, between them, raised over £2b with funding helping to repair company balance sheets and support business growth.
Many AIM investors have benefited from an increase in the value of AIM companies post-recession. At the beginning of January 2009 the FTSE AIM All-share index was at 394.32, however, by the end of the 2012 the index stood at 704.53, (even allowing for a dip over recent months).
Although AIM still has some ground to cover before we return to the days of 200 plus companies floating on the market a year, there is currently no shortage of investment capital waiting to invest in companies looking to join AIM, that are able to demonstrate growth potential and have a strong good story to tell.
Although there are no size restrictions for companies joining AIM, in most cases investors will want to see minimum profitability of around £1m. In exceptional circumstances this maybe slightly lower. No trading record is required prior to joining AIM and there restriction on the amount of shares that a company is required to put onto the market at admission. However a minimum of 20% is regarded by investors as a minimum ‘free float’ ensuring that there is some liquidity in the company’s shares once floated.
AIM’s flexible regulatory regime has always been attractive to smaller growing companies, allowing them to benefit from joining a global stock market whilst offering a balanced rule book enabling companies to raise funding at the time of admission and then in further tranches as required, but without the burden of too much red tape.
At a time when banks continue to restrict lending to growing UK companies, for some, AIM offers a real opportunity to raise considerable growth capital and to benefit from the enhanced status and profile of being a listed company on AIM, which remains a globally recognised Stock Market.
Comment by John Holland – Holland Bendelow Flotation Consultants, January 2012
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