The decision by ASOS PLC (AIM:ASC) to leave AIM will leave London’s junior market with just seven companies valued at more than £2bn.
The seven non-dwarfs (market capitalisation in brackets) are Hutchmed (China) Ltd (£4.2bn); Abcam (AIM:ABC) PLC (£3.3bn); Fevertree Drinks (AIM:FEVR) PLC (£3.1bn); Jet2 PLC (AIM:JET2) (£2.7bn); RWS Holdings (AIM:RWS) PLC (£2.3bn); ITM Power PLC (AIM:ITM) (£2.2bn); Keywords Studios PLC (AIM:KWS, OTC:KYYWF) (£2.0bn).
ASOS, valued at £2.3bn, has been on AIM since late 2001 which is a long time for a company to put off the big leap to London’s main market, especially when for much of that time it has been AIM’s highest-valued company, but then again, there are big companies on AIM that have been listed for longer, among them the aforementioned Jet2 and RWS.
So, ASOS’s decision does not necessarily mean that the market’s big hitters are all planning to jump ship as well.
In general, the costs and bureaucratic overheads of listing on AIM are lower than on London’s main market, which is why so many big companies stick with it.
In its stock market announcement, ASOS gave a nod to those bureaucratic overheads, saying it has “adopted, applied and reported against the UK Corporate Governance Code for several years”.
AIM-listed companies are not eligible for inclusion in the FTSE 100 or FTSE 250 and ASOS’s market capitalisation would put it roughly halfway down the list of the biggest companies in the FTSE 250, so the switch to the main market will certainly attract the attention of fund managers running index-tracking funds.
On the other hand, there are fund managers that prefer to back AIM, with its reputation for fast-growth companies.
Alexandra Jackson, manager of the Rathbone UK Opportunities fund, said the fund has around a fifth of its portfolio in AIM companies and it’s been higher in the past.
“The reason it's come down is mainly actually because some of the AIM companies that we own have moved to the main list - which is fine, it doesn't really impact us, but I sense that other more global investors prefer it if some of these companies are main market listed.
“ASOS have spent years saying ‘we don’t need to’ – so it’s interesting that a change in management has come with a change in view on that.
“Others in the portfolio that have moved include Draper Esprit, or Molten Ventures as it’s called now, the venture capital firm," Jackson noted.
"Again they've been AIM-listed for a long time and they've just moved to the main list and I think it's about that sort of global, you know, wanting to take their place on a global stage and saying, you know, there's nothing you can sort of say that we're not doing, [that] we're not disclosing or we're not living up to the same reporting standards or governance or whatever.
“I don't have sort of strong views on AIM per se. I think it's still really good at doing what it's meant to do, which is be a good place for growth companies to raise capital in a quick way, there are lots of companies that we own that would not have been able to go on their journey without having access to the capital that AIM can provide quite quickly. I guess I'm a bit surprised at how many companies have elected in the last six to 12 months to move to the main list because there hasn't really been an obvious driver. We haven't seen that for a while and I think it is, for companies, just trying to eliminate any excuse that global investors might have for not investing in them.
“I think AIM does still have an edge for some people, there's no hiding that. It's called the junior index, the disclosure requirements are slightly lighter. Most of the companies that we own, they match their disclosure to the main list, we really like to see that and we definitely encourage our companies to do that, just so that there isn't really any difference.”
AIM’s purpose is to enable fast-growing companies to gain access to capital so they can carry on growing. It’s not hard to argue that ASOS has moved beyond that point but happily, there are some sizeable companies that have listed on AIM in the last year, including a couple that could soon join the AIM billionaires club and maybe one day become as big as ASOS.
The two candidates for the billionaires club are Devolver Digital Inc (AIM:DEVO), a gaming software company that is valued at £927mln, and Big Technologies PLC (AIM:BIG), a surveillance technology company that is valued at £907mln.
In total, around 75 companies floated on AIM last year, including a couple with a market capitalisation of less than £10mln, proving that AIM companies still come in all shapes and sizes.
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