The average market capitalisation of companies listed on the Alternative Investment Market (AIM) in London has soared past £100mln for the first time, research from a new study has shown.
According to data gathered by accountancy group Moore Stephens, the average company listed on the junior market was valued at £111mln as of December 2017 – an increase of almost 50% compared to four years earlier (£70mln).
Asos leads the way
There have been a few notable risers over that timeframe, including online fashion retailers ASOS PLC (LON:ASC) and Boohoo.com PLC (LON:BOO), as well as posh tonic maker Fevertree Drinks PLC (LON:FEVR).
Asos has seen its value swell to almost £6bn, while its rival Boohoo.com’s has seen its stock price more than double since it joined AIM towards the start of 2014, giving it a market cap of £1.7bn.
As for Fevertree, the Chelsea-based mixer maker only floated in November 2014, but it has enjoyed a meteoric rise over the past few years.
It sold shares at 134p ahead of its initial public offering (IPO) back then and those same shares go for around £27 apiece now – a stonking rise of more than 1,500%.
Fevertree’s present market value is a shade over £3bn, which has resulted in a few nice paydays for its two founders and early backers.
Has AIM lost its way?
“The increasing trend in size of AIM companies signifies a positive sentiment to the market,” said Moore Stephens head of capital markets, Marty Lau.
“This also means new issuers tend to be larger, more established companies. This is to the benefit of those companies listed on the market, but brings to light a key question – is this what AIM is all about?”
Lau added: “The external view of the market improves on a snapshot basis with each market capitalisation but there is an impression that as these get larger, smaller companies shouldn’t be on AIM.
“If this trend is being pushed by regulators, there could be a risk that the lines between AIM and the Main Market become blurred, to AIM’s detriment.”
Still space for the small caps …
Despite the rise in average market capitalisations, Moore Stephens study did show that small caps are still the lifeblood of the junior market.
Of the 950 companies currently listed on AIM, 437 (46%) have a market capitalisation of below £25mln and 249 (26%) have a market capitalisation below £10mln.
Still, it’s not always suitable or beneficial for companies with a small market value to go public, as Distil PLC’s (LON:DIS) finance director, Shaun Claydon, explains.
“Due to increasing regulation and ongoing costs of membership, companies which are active users of the market and raise follow on capital will benefit most from their AIM listing.
“By contrast, for the many micro-cap companies on AIM which are under researched, have poor liquidity and rarely tap the market for more funds, the costs of AIM are likely to outweigh the benefits beyond the initial access to public equity capital at IPO.”
AIM bosses optimistic
Moore Stephens’ study also revealed that the bosses of AIM-quoted firms are generally optimistic about their companies and the market as a whole.
More than half of those polled (53%) indicated that they were positive about what the next year holds, while 86% think their company is well-positioned to grow revenues in 2018.
“This confidence is encouraging,” said Lau.
“Despite a period of political and therefore economic uncertainty for both companies and advisors, to be demonstrating such optimism shows that AIM is still an excellent market to do business on.”