By Amy-Jo Crowley
LONDON (Reuters) - An exodus of companies from London's Alternative Investment (AIM) market is set to accelerate into 2025, even as Britain's policymakers try to revive the country's capital markets, bankers and financial advisers to AIM companies told Reuters.
Already in 2025, Britain's Alliance Pharma agreed to sell itself to asset management firm DBAY Advisors, and online marketing firm Team Internet said it had received takeover approaches from private equity bidders.
This 30-year-old segment of the London Stock Exchange was designed to help smaller companies secure capital, with fewer listing requirements than the main market.
But now a growing number of AIM members are considering delisting or putting themselves up for sale as market valuations have slumped and changes in Britain's tax rules have made these listings less attractive.
“We are seeing an increasing number of AIM company boards who are considering their options, including running a private or public sale process, and – particularly at the larger end – there is a growing trend for AIM companies to think about a move to the main market to benefit in part from more liquidity,” said Marc Jones, a managing director who focuses on M&A at Peel Hunt.
UK officials implemented a suite of listing reforms last year aimed at helping London compete with New York and the European Union after Brexit. This easing of listing rules has yet to yield any noticeable turnaround in initial public offerings (IPOs), however, which has been accompanied by a long spell of outflows from UK funds.
A total of 89 companies left the junior exchange last year, with just 18 joining. That compares with 2021 when there were just 54 departures from AIM and 66 additions.
And an estimated third of AIM companies with a market value of 50 million to 250 million pounds ($61-$305 million) are vulnerable to bids, according to Peel Hunt.
AIM stocks are trading at 30% to 40% below their 10-year average as investors have pulled out more cash from UK funds, versus a 10% to 20% discount on the FTSE 100 and 250 markets, said Graham Simpson, head of Quest Research.
"AIM disappearing would be catastrophic," said Simpson, adding it would be an admission that Britain is not interested in supporting entrepreneurs, startups and growth businesses.
Simpson blamed outflows from UK equity funds and "apathy" about investing in small UK companies given their poor performance of recent years.
UK-focused equity funds have seen 41 consecutive months of outflows, a driver of more departures from AIM, according to Panmure Liberum deputy CEO Bidhi Bhoma. At the same time, there has been a lack of IPOs to counter the departures.