And they’re back for more AIM IPOs

Patrizia Rossi reviews the year that secondary fundraisings on AIM picked up and IPOs slowed down.

There were 20 AIM IPOs in November, with two companies raising more than £200 million each. Newly-formed property investment company London & Stamford raised £248 million to build up its portfolio of UK and overseas real estate. And Chinese property fund Pacific Alliance China raised £244 million to fund investments in residential, commercial and industrial properties in China and >Macau.

These new listings with large fundraisings are not unusual of 2007 although difficult market conditions have caused the number of admissions to fall to 234 (to October 2007) – considerably less than the 290 companies that joined the market in 2006 – with average fundraisings of £23 million per company

Andrew Gillen, partner, Travers Smith, has seen a number of IPOs that have been pulled or postponed this year. “Our experience is that there has definitely been a softening in the market and we’ve seen less overseas companies coming through. The ones that have been pulled have often been sector specific, such as construction and financial services. The consumer goods sector has also been badly hit,” Gillen says.

One company failing to complete an IPO recently was Russian Timber. Russia’s second largest timber harvesting firm by volume abandoned plans to float because of the “difficult investment climate”. If the listing had gone ahead, the firm would have been the first forest products company in Russia to list in the UK.

Gillen says: “Companies that have pulled their IPO are now looking for alternative exits, sales, other types of fundraisings or have said ‘lets see what the situation will be in six months’ time’.”

Turmoil in the credit markets has impacted AIM IPOs this year and Gillen believes that investors are being more selective about the businesses they choose to back. He points out: “There is still an appetite for quality companies in the ‘right sectors’, such as renewables.”

This year saw 13 renewable energy companies admitted to AIM, raising £350 million in total. However, the figures have dropped on last year when 21 IPOs drew funds of £690 million, according to Growth Company Investor magazine.

Despite the low number of IPOs, £5.3 billion was raised to 31 October. James Ferguson of Deloitte’s capital markets team observes: “This year has been active for AIM; with a smaller number of companies typically raising larger amounts of funds.”

Second coming

As for existing companies, £8.1 billion was raised in secondary fundraisings on AIM, indicating that existing AIM companies are coming back to market for a second time to raise further cash.

Ferguson explains: “If you look at 2005-2006, there were a number of companies coming to market with good investment stories. They delivered on their promises to investors and came back in 2007 for secondary fundraisings. Investors are quite happy to put more money into these investments because they’ve got a proven record.”

And Gillen agrees: “AIM is a more mature index now and there are more companies on AIM that have been there for a while and need secondary fundraisings.”

There are probably some companies that need additional financing and with the debt markets being less receptive, going to the equity markets is an obvious alternative.”

Fergusson adds: “It’s gratifying to see the success of secondary fundraisings because I think they prove that we’ve got quality companies coming to market, delivering on their promises and coming back having been successful.”

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