Quarterly analysis of the AIM market by Deloitte, the business advisory firm, has shown that there has been the lowest level of activity on AIM in quarter three of 2008 than in any other quarter for over 4 years.

Richard Thornhill, capital markets Director at Deloitte, commented: “The wider economic turmoil that we are all aware of has stymied almost all attempts to raise new money on the AIM market.  There remains a pipeline of companies seeking an admission to AIM, but these are currently playing a waiting game: even if they found investors willing to provide the funds, the severe risk aversion in the marketplace means valuation expectations are difficult, if not impossible, to meet.”

Thornhill highlighted the following key observations from quarter three:

• Total fundraising on the AIM market was £826m, comprising £190m of new money and £637m of secondary fundraising.  This total is the lowest since the onset of the credit crunch in Q3 2007 and the lowest total quarterly fundraising for over 4 years (Q1 2004: £820m);
• During Q3 2008 there were 23 new admissions (Q3 2007: 79) of which only 15 raised new money (Q3 2007: 59);
• Fundraising tailed off significantly month by month as the quarter progressed, with just £13m of new money being raised on the market in the month of September, and £83m of secondary funds; and
• The current market value of AIM stands at £61.5bn (30 June 2008: £91.3bn).  The total capitalisation of the market has therefore fallen by 33% in quarter three 2008.

Commenting on what it will take for levels of activity to pick up again, Thornhill said:  “The turmoil in the wider economy has meant that the smaller fast growing companies that tend to gravitate to AIM are holding back from admission. The principal factor restricting the flow of IPOs is perceived uncertainty about the future.  Reduced uncertainty with regard to the outlook for the UK and world economy is a pre-requisite to enabling companies coming to the AIM market to set out their future plans with more credibility. Recovery in the AIM market is likely to be preceded by a wider improvement in the world’s major equity markets, signalling a general increase in enthusiasm for equities.”

In addition, Deloitte also believes a number of institutional shareholders in AIM are, questioning whether small cap listed companies will return to favour even in the medium term.  The crunch has only exacerbated liquidity issues for investors at the low end of the market.

Thornhill comments: “The timing of any upswing in activity remains extremely uncertain.  When it comes it will be led by stronger companies with compelling stories and good management, and we expect significantly reduced opportunity for some of the smaller more speculative plays that have driven volumes in the past.”

Deloitte continues to track the AIM market for signs of life in Q4. The results for October show a further deterioration - in fact no new money was raised by companies gaining admission to trading on the market during the month:

• Total fundraising in the month was £82m, all of which was secondary fundraising from companies already listed on the market – principally in the Oil, Gas and Natural Resources sectors; and
• 7 companies gained admission to AIM in the month but none of these raised any new money.  The companies gaining admission were in a variety of sectors including transportation, building materials and heavy construction.  Two companies, Fletcher King and Wagon Plc were introductions from the Main Market.

Thornhill concludes: “This suggests continuing, if not increased, uncertainty for companies coming to the AIM market.  It will be interesting to see whether the market for new money on AIM is essentially closed until the New Year.”

Ends

Notes to editors

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.  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 acts or 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.