New Issues Examined by Oliver Haill

Flotation numbers on AIM fell from an average of over 330 a year between 2004 to 2007 to 70 in 2008 and a mere 18 in 2009, with levels of fundraising for new companies (including readmissions) falling from an average £6.4 billion a year in the preceding four years to £1.1 billion in 2008 and £740 million in 2009.

On the positive side, as well as increasing the support for companies already on the market, with £4.8 billion of secondary fundraisings taking place last year, an increase year-on-year, IPO funding increased by 75 per cent from the first half of 2009 to the second, as new issue numbers jumped from three to 15. Furthermore, the two largest fundraisings of the past two years both fell in 2009: namely Max Property’s £220 million issue and Better Capital’s £143 million haul.

Moulton and Marwyn worth a punt
The latter mentioned Better Capital, the new vehicle for private equity mogul Jon Moulton, was one of three companies debuting on AIM in December and its shares have already advanced 9 per cent since listing. Moulton intends to capitalise on the depressed state of the economy and invest in his speciality area of turning around distressed companies. The Guernsey-incorporated fund expects to generate significant capital growth and, with Moulton’s reputation and expertise, could well repay a speculative punt.

December’s other arrivals were a pair of cash shells, Marwyn Capital I and Marwyn Capital II, floated by investment house Marwyn and broker Cenkos in respective £6.26 million and £4.9 million IPOs.

The canny Marwyn team aim to repeat past AIM successes – including Talarius, Inspicio and Concateno – by executing a similar buy-and-build strategy in a consolidating sector. Once the initial acquisition is made, usually via a reverse takeover, Marwyn installs top-notch management and backs it by raising funds for further purchases.

Investors have already demonstrated their high hopes for both, with the first of the pair, focused on the media, support services and industrials sectors, up 62.5 per cent from its 10p issue price. Shares in its sister fund, concentrating on healthcare, testing and inspection and leisure, have appreciated by 30 per cent to 13p. Both are certainly worth watching.

At the time of going to press, January was due to see another consolidation play take to the market in debt recovery firm Winterhill, which wants to raise £6 million with the assistance of broker and adviser Daniel Stewart. The group will provide a range of support services – including valuations, disposals and corporate debt recovery to banks, financial institutions and asset-based lenders and the intention is to make a series of acquisitions around what it says is a ‘fragmented’ sector.

Advisers anticipate upturn
While January witnessed just this one float, the AIM advisory community is in a bullish mood, as we found in our recent AIM in Review 2010 research report (see page 24). Encouragingly, many say the numbers of clients wishing to float is on the up.

Sam Smith, managing director of broker and nomad FinnCap, is typical of the upbeat attitude, saying ‘we think IPOs are coming back, there is lots of potential and we have good three-month visibility.’

Mark Brady, head of corporate finance at Brewin Dolphin, has heard enough gossip around the City to persuade him that activity is on the up as ‘everyone seems to be dusting off IPOs that they’d mothballed’. This includes Brewin: ‘our pipeline is good but we are quite selective, but it’s a big improvement compared to the last 12 months and we are looking quite seriously at a handful of deals’.

Likewise, Nick Tulloch, Arbuthnot Securities’ head of corporate finance, has a ‘pretty good’ pipeline, with ‘a number at different stages… [and] from different sources, some from private equity, some from private individuals or others spun out of other businesses’ as well as an imminent full list transfer by consultant engineer WYG.