The Turnaround on AIM by James Crux

At long last, AIM IPO activity levels are undergoing resurgence. At least, these are the findings of Growth Company Investor’s latest research report – New Issues on AIM 2010 January-June – of which this month’s feature (see page 24) forms but a small part.

This report is our first investigation into AIM half-year new issues since 2008, because, with only three companies joining the growth companies market between January and June of 2009, there was very little to write about last year!

Nevertheless, AIM welcomed 21 new entrants inthe first half of 2010. And, though that figure was well down on the 109 and 46 new issues that filtered onto the market in the comparative periods of 2007 and 2008 respectively, it still represents a positive upswing compared with the aforementioned trio that dared test the AIM waters in early 2009.

Appetite among institutional and other investors is returning, with £350.6 million in total funds raised during the half, up by the best part of 60 per cent on the comparable period last year. And what is more, a further ten new issues braved AIM in July and August – none arrived during the equivalent months in 2009 –collectively raising a sizeable £94 million.

One of the report’s fascinating findings is that, in the wake of the shake-out of AIM, its typical new entrant is now more likely to operate overseas than in the UK, reflecting efforts made to attract foreign issuers as well as investor appetite for exposure to growth in emerging markets.

To give but a flavour, 2010 newcomers to date range from Anglo-Brazilian real estate developer Squarestone Brasil to DP Poland, owner of the rights to develop Domino’s Pizza stores in Poland and Masawara, which will use AIM to pursue investment opportunities in high-risk Zimbabwe. More recently, iEnergizer, the Indian business processing outsourcer, raised a sizeable £37 million amid ongoing tough markets.

So the AIM new issues market is open once again and companies with a good story and a quality product are finding an audience. But the entry barriers are now higher, new entrants need to be of much better quality and the pricing of a new issue has to be right. That is no bad thing for investors.