By Josh Yelland
Following on from the earlier post ‘Listings:Aim and Beyond‘, this is my second article taken from text produced by PKF firm, PKF Littlejohn LLP. This one was from PKF Littlejohn LLP’s Business Services Manager, Adam Humphreys, who took a look at how activity changed in the capital markets in 2018 and identifies potential reasons for this.
2018 saw the first decrease in market capital on the AIM market since 2015 and a 14% drop in money raised, to £5.5billion – when compared to 2017 at £6.4billion. The decrease in money raised on AIM was isolated to the second half of 2018 and many onlookers will blame this on the continued uncertainty surrounding Brexit. However, there may be other factors at play, as I explore below.
Of the money raised, there was no significant change in the proportion attributed to each sector, with financial, industrials and oil and gas as the top three industries. Oil and gas was the only one of the three which saw more money raised in 2018 (£895million) compared to 2017 (£701million).
This could suggest that the oil and gas sector is more resistant than the other leading industries to a possible market downturn in the UK.
There was also no major change in the distribution of companies by market capital on AIM in 2018 compared to 2017.
Contrary to the year-on-year decrease in money raised on AIM in 2018, the Main Market experienced a 19% increase to £17.7billion. This rise is coupled with a significant shift in the distribution of companies by market capital, as the chart below demonstrates. On the Main Market, 23% of companies now have a market capital of £25million or less, considered ‘Small Cap’, compared to just 8% at the end of 2017.
Total money raised across both AIM and the Main Market was up by 10% in 2018, despite the drop in the amount raised on AIM. This, together with the decrease in company size on the Main Market, is evidence of small cap companies preferring to list here rather than on AIM. The reason for this shift is unknown, however it could be attributable to perceived lower compliance issues, decreased advisor fees associated with a list on the standard segment of the Main Market and/or a perceived market safety and reduced volatility of shares on the Main Market.”