£3m in new equity raised London’s Alternative Investment Market experienced its lowest number of initial public offerings for one quarter in 13 years in Q3 2022, with just one company listing. Research conducted by national accountancy group UHY Hacker Young found just £3m in new equity was raised during the quarter, which was significantly lower than the same period last year (£468m).
Colin Wright, partner and chair of UHY Hacker Young, said the period of "market turmoil" had made it difficult for businesses to successfully IPO. He said companies that were preparing to list would have been "been forced to hold off until the current volatility subsides".
Wright added: "At least two AIM IPOs that were confirmed as flotations for September have been paused. The same will have happened to plenty more floats that were further back in the pipeline.
"If you are going to delay an IPO its best to do it early on in the marketing or before the marketing is done."
Declining UK IPOs and rising M&A have created a 'perfect storm' The macroeconomic backdrop of rising inflation and a volatile UK market and currency have acted as major headwinds for companies looking to list, as these factors not only make its financial outlook less certain but puts the rest of the UK market on a valuation discount versus other developed indices, meaning that IPOs would struggle to achieve its target valuation.
Earlier this week, Edison Group reported an "IPO apocalypse" had occurred, with nearly 50% of the IPOs that have listed across the UK, US and Europe since 2020 now trading at least half its original listing price.
On AIM specifically, Wright said that he expected it to experience the "same degree of disruption in the coming recession as it did during the 2008-09 recession".
During that time, AIM had 95 stocks delist due to "financial stress and insolvency", but so far, that level of despondency has not materialised. Just 11 companies have left AIM for that reason in the 18 months following the beginning of the coronavirus disruption, the accountancy firm said.
Wright explained: "AIM is a very different market now than it was at the start of the last recession. 2008 and 2009 saw a lot of the market's weaker companies leave.
"A concerted effort by the London Stock Exchange to improve the quality of governance on the market over the last decade. That, coupled with a stronger, more diverse selection of industries represented on the market, has meant that AIM companies are now better able to weather storms."
Source: Eve Maddock-Jones, Investment Week