AIM Strengthens Global Appeal Despite Difficult Economic Conditions

The Taking AIM Survey 2008, undertaken by Baker Tilly in partnership with Faegre & Benson, was carried out by an independent research consultancy. The survey involved 200 companies currently quoted on AIM, 50 private companies and 50 institutional investors actively investing in companies listed on AIM. Of the 200 companies listed on AIM, 60 are overseas companies and 140 are UK companies.

AIM listings continued to grow in 2007, in spite of economic uncertainties, according to the latest Baker Tilly and Faegre & Benson Taking AIM survey, which showed that the AIM market continues to be attractive for investors, particularly from the key emerging markets. 2007 also saw the first admissions from Switzerland and Finland, and strong activity from other countries including Ireland, the Netherlands and Cyprus.

AIM now lists more companies than the Main Market (around 1600). On key measures such as market cap and turnover, as well as the number of new issues, the survey shows that it is outperforming not only the Main Market but European and US exchanges as well.

The survey, which was carried out by an independent research consultancy, involved more than 200 AIM companies, 50 private companies, and over 50 AIM investors. It covered the four key indicators of performance, regulation and quality of companies, competition with other sources of finance, and future outlook.

Economic uncertainties, especially in the last quarter of 2007, was thought to play a role for the downturn in the AIM market. Just over half of AIM companies interviewed (53%) said that their own share price had performed ‘worse' than expected during 2007. This was particularly true of the more established AIM companies (58%), whereas recent market entrants had perhaps been better prepared for a difficult ride – only just over one in three (36%) of recent entrants said that their shares had performed worse than expected. A poor performance across global markets, including particular sectors, coupled with lower than expected performance of individual companies, were all factors cited by companies for weaker share prices.

The report also shows that AIM has clearly established its place on the world stage and that even in turbulent market conditions, AIM still has a big attraction to companies, and increasingly to investors, from around the world.

One of AIM's main assets is that it continues to be an attractive market to support overseas companies looking to raise international funding and to tap into the valuable UK investment community. Although increases in regulation have long been seen as a main threat to AIM and its continuing success, recent tightening of the rules has generally been welcomed by both investors and AIM companies. And a majority of companies continue to acknowledge that floating on AIM was relatively easy. In particular, AIM remains an attractive option for growing private companies.

Although over half of investors think there is a dearth of good quality UK companies listing on AIM, half think that the increased globalization of AIM is generally beneficial—a significant change from the previous year in which only 29% thought it beneficial.

On the advisory side, the majority of AIM companies are pleased with the quality of advice from their advisers, with lawyers faring particularly well.

Looking Ahead

Despite concerns that difficult market conditions will prevail at least for the first half of 2008, investors who participated in the survey acknowledged that AIM is resilient and will continue to provide opportunities for both companies and investors. Whilst it will continue to be a market for growing international companies, there is some variation of view. One or two see it becoming increasingly attractive to international companies – and with that, to hopefully attract international investors – becoming a true international market. The mix of countries represented may vary, as it opens up to new emerging countries and their growth businesses.

Melanie Wadsworth, a corporate partner at Faegre & Benson noted:

"Clearly, 2007 was a challenging year for all markets but this survey showed that despite market weaknesses, AIM remains an attractive route for investors seeking access to capital. It may be that in years to come, competition emerges from other countries. But they will find it difficult to replicate the quality of the AIM market in London. Both established players from western Europe, as well as emerging market companies, are continuing to seek out AIM as a way to access new sources of capital. AIM has been around long enough to prove that it can sustain difficult economic conditions and continue to thrive."

Chilton Taylor, head of capital markets at Baker Tilly, said:

‘In a difficult year for all markets, AIM nevertheless continued to grow and now lists more companies than our main market. It has truly become a global market with approximately a third of businesses outside the UK. AIM's deep source of institutional funds has attracted overseas companies whose own markets do not necessarily serve the smaller growing listed company.'