Aim matches parent in IPO fund-raising
By Tony Tassell
Published: December 31 2004 02:00 | Last updated: December 31 2004 02:00
A surge in initial public offerings on Aim this year saw the junior share market match the fund-raising from flotations of its parent, the main London market.
The main London market experienced a recovery in IPOs in 2004 with 17 trading companies raising more than £2.606bn, according to statistics from KPMG, compared with £2.431bn raised in eight flotations of trading companies in 2003.
However, the growth was far exceeded by Aim which had the highest IPO flow by value and volume since its creation in 1995.
Neil Austin, head of new issues at KPMG, said Aim had become the market of choice for small to medium-sized companies to list on.
Some 226 IPOs raised £2.6bn on Aim in 2004, boosted by a strong deal flow from the oil and natural resources sector. This was sharply higher than the £986m raised from 66 flotations in the previous year.
Funds raised also exceeded the £1.7bn collected during the dotcom boom in 2000.
Mr Austin said Aim offered tax advantages for investors and lighter regulation for firms.
"If you are a small to medium-sized company, you now really have to ask what are the advantages of listing on the main London market," he said.
Mr Austin also said the main market was missing out on billions of pounds worth of IPOs as a result of private equity houses using their financial muscle to buy businesses which would traditionally have been floated on the market.
There had also been a rise in the number of firms sold from one private equity house to another in so-called "secondary" market deals.
KPMG said the marked increase in IPOs on the main market in 2004 had been encouraging but "supply issues" remained.
"The pipeline is populated with a limited number of high-quality companies," said Mr Austin. The few companies reported to be seeking IPOs in 2005 include Britvic, Celtel, ProStrakan, BP Chemicals, RHM and Amtel.
Mr Austin said a number of market debutants in 2004 had to cut the pricing of their offer or reduce its size in order to get it under away. This translated, however, into some strong returns for investors.
Ten of the 13 trading companies that joined the main market in 2004 are showing gains from their IPOs to date. They have also outperformed the market with an average rise of 25.6 per cent compared with an equivalent figure of 1.8 per cent for the market as a whole.
The best performing IPO was the July float of Cambridge Silicon Radio, which is now 92 per cent higher than its issue price.
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