IPOs fall as cost of listing on AIM jumps to 7.7% of all funds raised
However, deals such as Time Out Group's £90m IPO and Hotel Chocolat Group's £16m float suggest a brighter future for AIM
Due to the cost of stricter due diligence standards and a weak IPO market, the cost of listing on the Alternative Investment Market (AIM) has increased significantly, according to UHY Hacker Young.
The amount companies that floated on AIM paid last year rose from 7.4% to an average of 7.7% of all funds raised, including fees to nomads, legal advisers and auditors and commission for placing shares.
Meanwhile, the average amount raised from AIM IPOs last year dropped to £18.4m from £27.8m the previous year. Earlier this month, research from UHY Hacker Young revealed that the number of companies de-listing from AIM rose 20% in the last year.
Stricter due diligence as a result of ongoing concerns over corporate governance within some overseas companies has added to the cost of living, while a weaker IPO market has led to listings raising smaller amounts.
Nevertheless, a number of major deals have already been completed in late 2016, suggesting that the outlook for London’s junior stock market may be improving.
These include Time Out Group’s £90m IPO, Comptoir Group’s £16m deal and Hotel Chocolat Group, which listed on AIM and raised £12m in May. More recently, conference call start-up LoopUp landed a £40m IPO in August.
Laurence Sacker, managing partner at UHY Hacker Young, commented: “Continuing concerns over a slowing Chinese economy and the uncertainty over Brexit have hit the IPO market hard.
“Those companies that have been able to list on AIM have had to scale back the amount of money they have raised leaving them with far less after money after costs.
“Even though there is not a lot of IPO work about, advisers have not been able to reduce their fees as they have had to work harder to complete the deals. The time advisers have to devote to due diligence and to market those shares to investors has increased, meaning there is little room to cut fees.”