Up to the end of November, there had been more admissions to AIM than in the whole of 2012 and it looks like, with a fair wind, the 2011 total will also be exceeded.
So what has caused this revival in AIM’s fortunes? To my mind, it’s the generally improving economic climate. The UK economy, having avoided what many thought would be a triple dip recession earlier this year, is posting some pretty decent economic growth figures and this looks like it will continue into 2014. On the international front, the Eurozone crisis has not blown up again, as it did in 2011 and in the first half of 2012. The US economy is growing nicely, although the Federal Reserve starting to taper its QE may cause a wobble or two. And the Iranian crisis has been resolved for the next six months at least.
So with this positive backdrop, institutional investors have been keen to invest in IPOs and there has been a rush of companies looking to come to market. In fact, for the first time in many years, a number of companies are undertaking investor roadshows right up until Christmas in the hope of getting on AIM before the end of the year. This is really a turnaround from the advice traditionally given by brokers to aspiring companies that they need to be on AIM by mid December because after that, the City is winding down for Christmas.
AIM has also been helped by the Government’s decision to allow AIM shares to be put into ISAs: it seems this has increased demand for AIM shares and has thus boosted liquidity. It is hoped that the removal of stamp duty from AIM shares in April 2014 will provide a similar boost.
In terms of sectors, it seems that mining and oil and gas companies, for so long the darlings of the AIM IPO market, have been less popular in 2013. Instead, more technology companies have been floating and this is definitely something we at BDO have seen.
So what is the outlook for 2014? Unless anything changes drastically on the macro economic front, I think it will continue positively, as companies take advantage of investor demand for floatations. There are two threats to this rosy picture, however. The first is AIM specific, in that too many companies attempting to float at the same time may give the market indigestion and, therefore, only the cream of the crop will be successful. Therefore, think carefully if you are looking to float and choose reputable advisers that will represent your company in the best light. The second is that one of the big macro economic issues that has been quiet in 2013 flairs up again, but who can foresee that? Instead, let’s all take in the positivity while it lasts.
