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Crisis at AIM as listings dry up

At this week's Corporate Finance forum the financial crisis was, as expected, at the top of the agenda. Two speakers presented equally doom laden news and the general mood was as downbeat as you can get. The interesting point from both presentations was that throughout this year there has been a massive number delisting of companies on AIM. There has been over a 40% drop and its still continuing and not surprisingly, there has also been the lowest number of small companies seeking to be list, since AIM began.  

The obvious conclusion is that AIM is going to struggle to continue unless financially supported by the London Stock Exchange or perhaps more government intervention. Another very interesting point was that the German equivalent of AIM has usurped London as the largest centre for small company listing. This has probably got much to do with the Euro but also the cost of listing in the UK.

The reasons for most small companies to delist are cost based and a release from reporting. By delisting small companies can avoid bad news upsetting their share price and putting pressure on the board. A private company can more easily take tough actions to prepare their company to stand up to any exacting conditions heading their way.

The time as a private company can be used effectively and will eventually create a better company and prospects for a return to listing.

It's unlikely that small companies have much chance of capital raising for many years to come, as investors will be more attracted to the main market. With the amount of capital raising and higher taxation looming, it's going to dry up much of the investing capital. However, according to the presentations there could be some light at the end of the tunnel, as there is money lurking within some venture capital companies looking for selective companies with genuine prospects. A glimmer that provides hope for the future but will AIM be around to take advantage?   

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Gary Wright

Gary Wright

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BISS Research

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