AIM Report 2019

28 29 For example, clothing retailer ASOS revealed in its April 2019 interim results that international retail sales were running over £300 million ahead of UK retail sales for the six months to 28 February. 29 Meanwhile Fever-Tree’s annual report for 2018 reported the drinks company had successfully established its own operations in the US. 30 And it is not just the companies at the top of AIM’s market capitalisation that are expanding globally. In April 2018 flexible workspace software provider Essensys, ranked 228 on AIM by market capitalisation in May 2019, 31 appointed a new vice president of operations for North America as the company looked to “accelerate the expansion of our North American business”. 32 AIM isn’t just a way to get tax reliefs and there is real merit in investing in AIM-quoted companies beyond the tax tail wagging the investment dog. MICAP figures show there have only ever been 61 tax efficient products focused on the AIM market, and while these will generally invest in more than one company, there are 901 companies quoted on the market, many of which will never have had any kind of tax efficient investment. It is also worth noting that not all firms on AIM will qualify for the tax reliefs, so their position on the market has nothing to do with tax efficient investing. This is important to remember, because it means that investments on AIM are made by investors not simply looking for tax relief, but as serious, considered investment opportunities. Companies that have received BR, EIS, VCT funding ahead of AIM listing Beauhurst has tracked 31,828 high-growth companies in the UK since 2011, of which 118 have held IPOs. 74 of those listed on AIM and 50 of those raised equity from private investors before listing. In the period 2011 to 2018 they raised £528 million before listing, in 132 rounds for an average of £4.06 million. In many cases, these companies will have raised through a combination of SEIS, EIS as well as from VCTs. On average these companies raised in total £11.8 million over four deals before listing. Typically a company waited 500 days between its last private fundraising and its first raising on public markets. Because of this delay, the amount raised by companies before IPOing appears to decrease year on year but this downwards trend is actually reflective of the lag between last private issuance and first public issuance. The top investors into private businesses before they go on to list on AIM represent a particular subset of institutional investors. They are often the top investors into AIM listed businesses because of the sectoral preferences present in their portfolio. That is to say, because Life Sciences and Medical Technology businesses are some of the most likely to list on public markets, their private investors are some of the most likely to have backed a company that goes on to list. Index Ventures and the Development Bank of Wales are the joint top backers of companies that went on to list on AIM. The Development Bank of Wales is a prolific investor by virtue of coinvesting in most deals that happen in Wales; Life Sciences is a sectoral strength of Wales’, so the Development Bank’s portfolio has a proportion of companies that went on to list. Woodford, through his Patient Capital Trust and Equity Income vehicles, is also a prominent backer of companies that have listed on AIM. These are the companies that would have been a relief to Woodford as his fund approached its liquidity thresholds – even if in the end they were not enough. Although many of the companies that raised privately before listing on AIM are in Life Sciences and related sectors, the company which raised the most before listing was in fact a tissue paper manufacturer. Accrol Papers raised £81 million through a combination of equity and debt before going on to list in an IPO which raised £63.5 million for the company. Considerations for investment / Thought leadership Henry Whorwood Head of Research and Consultancy, Beauhurst INVESTMENT INTO COMPANIES THAT SUBSEQUENTLY LISTED ON AIM Funder Manager Index Ventures Index Ventures 9 Start UP & Early stage capital Bank of Wales 9 Woodford Investment Mngmt Woodford IM 8 IP Group IP Group 7 Syncona Partners Syncona Partners 6 DN Capital DN Capital 5 Invesco Perpetual Invesco Fund Managers 5 Parkwalk UK Tech Fund Parkwalk Advisors 5 Temasek 5 Touchstone Innovations Touchstone Innovations 5 TOP FUNDERS AND NO. OF FUNDRAISINGS 0 4 8 12 16 20 24 28 £120m £80m £100m £60m £20m £40m £0 2018 2011 2012 2013 2014 2015 2016 2017 Amount raised Valuation Average Stake Taken Total £528m Pre-investment £19.1m Average 18.8% Average £4.06m Post-investment £22.6m Considerations for investment / SMEs and the economy £4,545,252,416 amount raised by Business Relief investments on AIM “We purchase qualifying AIM shares on our clients’ behalf to assist in making their inheritance eligible for Business Relief. However, since HMRC do not provide a definitive list of eligible companies, a big challenge is ensuring our clients have a diversified portfolio to maximise the potential tax relief BR can offer.” — CHRIS MURPHY, INVESTMENT MANAGER, WALKER CRIPS SOURCE: MICAP