Quarterly analysis of the AIM market by Deloitte, the business advisory firm, has shown that the market has hit the lowest level of activity in three years.

John Hammond, capital markets partner at Deloitte, commented: “The worst of the downturn was expected to hit AIM in the second half of 2007, but a flow of IPOs in the pipeline kept the overall numbers afloat.  Figures for 2008 show, however, that the trickle has dried up with a 60% drop in new fundraising.  Indeed January was the lowest month since 2004.  The slump in activity on AIM demonstrates just how sensitive alternative investments are to an economic downturn.  The AIM index has declined by around 20% compared to a fall of 10% in the FTSE as institutional investors switch from riskier investments to blue chips.”

While new fundraisings have been hit by the economic downturn, we are still seeing a steady flow of listings on AIM.  Richard Thornhill, capital markets director at Deloitte, commented: “Of the 32 companies that were admitted to AIM in the quarter, half were transactions that involved no fundraising at all.  This compares with around 30% in the previous quarter (19 out of 67 admissions in Q4 2007).  There is good reason for such an approach: while it might be difficult to access capital at the moment, those companies that are listed will be in a good position to move quickly when conditions change.  Those companies that can demonstrate successful trading results as a listed entity will be in a particularly advantageous position.”

The increase in secondary fundraising levels is a growing trend.  Thornhill continued: “During 2007, AIM saw secondary fundraisings outstrip those from new IPOs by 45% (£9.6bn vs £6.6bn) as maturing AIM companies with demonstrably successful results came back to the market for additional funds.  Despite difficult market conditions it will still make sense for certain companies to invest in completing an admission. We expect that admissions with no fundraising will continue to form a significant proportion of new IPOs on AIM whilst the wider turmoil in the economy remains unresolved.”

Key findings:

• There was a 60% drop in total funds raised on AIM in Q1 2008  compared with the previous year (£1.1bn in Q1 2008 down from £2.8bn in Q1 2007; £3.1bn in Q4 2007);
• Less than 10% (£0.3bn) of funds raised this year have been from new IPOs; the first time that this figure has been below £1bn since Q1 2005 (£1.3bn in Q4 2007);
• January 2008 was the lowest month for new fundraising since February 2004 with only £27m funds raised.

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About Deloitte
 
In this press release references to Deloitte are references to Deloitte & Touche LLP which is among the country’s leading professional services firms, providing audit, tax, consulting and corporate finance services. Deloitte & Touche LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu (‘DTT’), a Swiss Verein whose member firms are separate and independent legal entities.  Neither DTT nor any of its member firms has any liability for each other’s omissions.  Services are provided by member firms or their subsidiaries and not by DTT.  Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority.  The information contained in this press release is correct at the time of going to press.