AIM Industry Report 2017/18

19 18 STOCK MARKET INDICES (H1 2017 REBASED) JAN 2017 75 95 80 100 85 105 90 110 115 120 125 FEB 2017 MAR 2017 APR 2017 MAY 2017 JUN 2017 FTSE AIM 100 FTSE ALL-SHARE SOURCE: BDO: AIM INSIGHTS, REVIEW OF AIM FOR THE SIX MONTHS TO JUNE 2017 APRIL High profile logistics company, Eddie Stobart, came back to the AIM market, three years after leaving, with a £572 million valuation. Neil Woodford snapped up almost 20% of the firm’s shares in the IPO. UHY Hacker Young released research. Managing partner Laurence Sacker found that, “The market is still a way off its strong performance on capital raising of a few years ago – but it is clear that Brexit related fears have not caused any major setbacks for AIM 27 .” JANUARY In January, an agreement was made between the LSE Group and its rival Euronext to sell its French clearing business for €510 million in an attempt to ease the regulatory pressure from the European Commission on its planned merger with Deutsche Börse. It was reported that the number of nominated advisers to companies quoting on AIM was down from over 50 in 2013 to 36. This coincides with the falling number of AIM-quoted companies. There were only 993 companies quoted on the AIM market at the end of 2016 with a total of £4.9 billion raised in that year. A decade ago, before the financial crisis, the market once had 1,694 companies raising £16.2 billion. (One question to ask may be: does the drop reflect an increase in quality of AIM-quoted firms?) The fall plus the regulatory pressure coming from the implementation of MiFID II had led to concerns over the profitability of nominated advisers (Nomads). They are responsible for ensuring their clients follow the rules of the AIM market, and companies cannot be or remain quoted on AIM without a Nomad. Neil Shah, director of research at Edison Investment Research, commented, “there’s a group of brokers who are going to struggle. I think we’ll see a contraction or consolidation of the number of brokers.” FEBRUARY NEX Exchange, previously known as ISDX, with just 84 members launched a direct challenge to AIM. AIM has actually been competing with the NEX Exchange, under different names and forms, throughout its history, and has established itself as a much larger and arguably superior junior market. Marcus Stuttard, head of AIM, commented: “From our globally successful growth market AIM, which over its 22-year history has supported over 3,600 companies to raise £100bn, to our private business support and capital raising programme, Elite, London Stock Exchange is committed to supporting ambitious businesses 23 .” MARCH The proposed merger between the London Stock Exchange and the Deutsche Börse was blocked by the European Commission on the basis that it would have created a “de facto monopoly in the crucial area of clearing of fixed income instruments 24 .” Commentators have since concluded that this helped boost confidence in the AIM market’s future 25 . It was reported that eight AIM stocks are now worth £1 billion or more 26 : ASOS, Abcam, Boohoo.com, Fevertree Drinks, Burford Capital, Hutchinson China Meditech, Breedon and James Halstead. MAY The Investment Association (IA) published new guidelines on Long Term Reporting for LSE quoted companies. The boom in oil and gas firms on AIM was highlighted with the performance of seven AIM-quoted oil stocks that had more than doubled in the year to date. This was aided by the relative stability of the crude market and a number of growth projects driving value creation and giving investors opportunities to speculate 28 . JULY LSE released a discussion paper looking at the AIM Rules, with proposals for potential changes and an invitation for feedback. The ‘persons with significant influence or control ‘(PSC) regime was extended to AIM companies with the intention of improving transparency regarding the ownership of UK companies by making PSC information publicly available to view through the Companies House website. SEPTEMBER The consultation period for the LSE’s proposed changes to the AIM Rules ended. Research from EY and Innovate Finance on behalf of HM Treasury revealed that a third of UK fintech start-ups are planning an IPO in the next five years, with AIM well placed to be their top choice for quoting. OCTOBER This month saw the announcement of the 2017 AIM Awards winners. The best performing share was Nu-Oil and Gas plc, AIM growth business of the year was Keywords Studios plc and the best newcomer of the year award went to Alpha FX Group plc. Scott McCubbin, EY’s IPO Leader, said that “Overall, we expect that Q4 2017 will be the most active quarter of the year with the pipeline looking strong for AIM and small Main Market listings, both areas that have been largely unaffected by events in the wider economy 33 .” NOVEMBER The 2017 Autumn budget pledged significant government support for UK SMEs and the types of high-growth companies for which AIM provides a platform. Marcus Stuttard, head of AIM commented, “We welcome the positive steps taken by the Government to maintain and enhance support for scaling-up businesses by providing greater access to long term risk capital.” AUGUST August 2017 saw the FTSE AIM All- Share index climb past the 1,000 level for the first time in nine years after rising 20% in the previous eight months. This substantially eclipsed the performance of large-cap indices amid geopolitical concerns 31 . New figures revealed that 57% of the total equity capital raised across European growth markets in the first half of 2017 was on the LSE’s AIM markets in London and Italy 32 . Nasdaq First North became the first marketplace outside the UK and Ireland to get Growth Market Status which gives British investors an exemption to the 1.5% UK Stamp Duty Reserve Tax (SDRT) normally charged on paperless share transactions on investments in British companies listed on Nasdaq First North. This has upped the competition to AIM for the quoting of smaller, growing firms. Nasdaq First North joins AIM, the Enterprise Securities Market (ESM), High Growth Segment (HGS) and NEX Exchange Ltd, all of which are focused on smaller companies with growth goals. JUNE BDO’s AIM Insights for H1 2017 found that, “The increase in IPO proceeds and reduction in further issues compared to H2 2016 suggests a slight increase in risk appetite. However, total proceeds were lower than the average over the last five years, suggesting investors are, in general, adopting a cautious approach to AIM investments 29 .” The AIM 100 increased by 18.2% in the first six months of 2017, significantly outperforming the FTSE All-Share which only increased by 2.8% and over a 12 month period, the performance of the AIM 100 index was an impressive 42.2% compared to 12.6% for the FTSE All-Share 30 . The effects of the general election result were immediate. At its peak on 2 June 2017, the AIM 100 had increased by 21.2% since the start of the year but it then declined by 2.5% as at 30 June 2017, broadly similar to the decline in the FTSE All-Share index in that period. This drop is likely to have been as a result of the inconclusive and unsettling general election result on 8 June. “More mature, more stable businesses are coming to the AIM market, which will allow them to raise expansion capital from firms like us to go out and expand.” — NIGEL ASHFIELD, TIME INVESTMENTS LSE DEVELOPMENTS NEWS ON THE AIM MARKET FTSE AIM INDICES VOLATILITY % AFTER GENERAL ELECTION 2017 JUNE 2017 JULY 2017 AUGUST 2017 SEPTEMBER 2017 INDEX 1YR 3YR 5YR 1YR 3YR 5YR 1YR 3YR 5YR 1YR 3YR 5YR UK 50 9.8 16.3 13.9 9.6 16.2 13.8 9.5 16.0 13.8 9.2 15.9 13.7 100 7.9 13.2 12.0 7.5 13.1 12.0 7.7 13.0 12.1 7.6 12.9 12.0 All-Share 6.1 11.0 10.6 5.7 11.0 10.5 5.9 10.9 10.6 5.8 10.9 10.5 SOURCE: FTSE RUSSELL AIM FACTSHEETS JUNE, JULY, AUGUST AND SEPTEMBER 2017 1YR based on 12 months, daily data. 3YR based on weekly data (Wednesday to Wednesday). 5YR based on monthly data.