Corporate Financing Analysis - AIM IPOs Ignoring Post-Brexit Vote Blues - 29 AUG 2016

IPO activity on the London Stock Exchange (LSE) main bourse may be on its knees this year in the wake of the UK's Brexit vote, but the junior alternative investment market (or AIM, as it is more commonly known) has stood its ground amidst the headwinds and is enjoying its second-highest volume of deals since the onset of the global financial crisis back in 2008. According to data provider Dealogic, London AIM-listed IPO activity is up by 72% y-o-y in terms of deal value, with 27 deals worth a combined US1.2bn having been completed as of August 2016. Listing activity thus far in 2016 has already surpassed the 2015 full-year tally of USD910mn by deal value and it will not be long before it does so by deal volume too. The increase in deals and also deal value has meant that the AIM has registered a 22% increase in the average size of floats (to USD34mn) over the average size recorded over the past six year-to-date (y-t-d) periods (USD36mn).

While the AIM has attracted both a greater number and larger size of deals in the y-t-d period, conversely, the LSE main bourse has seen activity head south in the other direction, dropping by as much as 74% y-o-y to as low as USD2.3bn across 13 deals so far in 2016. By the same stage last year, the LSE had enjoyed the pricing of 28 floats worth USD8.82bn. This sharp y-o-y drop in IPOs represents the third lowest y-t-d level on record, only ahead of 2009 - when no deals had been priced by this time that year thanks to the onset of the global financial crisis - and 2012 - when just three deals worth USD488mn had been recorded. As a result, the LSE-listed average IPO size is down 68% to a level of USD176mn; this is less than half the average size of USD550mn recorded over the last six y-t-d periods. The AIM market has not just been occupied with hosting a growing number of larger deals but it has also been busy posting positive returns. Bloomberg data shows that the FTSE AIM All-Share Index returned 5.64% since the turn of the year, outperforming the benchmark European EURO Stoxx 50 index which has incurred losses of 8.38% so far in 2016.

The biggest deal to have been completed on the AIM bourse so far this year (and the largest debut for over two years) has come from student property developer Watkins Jones which raised GBP131.1mn (USD187mn) from a floatation deal on March 16 in return for the sale of a 45% stake in the company. Significantly, among the firms buying into the company was private equity group BlackRock. Meanwhile, other sizeable floats to have priced in the AIM market include media company Time Out Group (USD131mn) on June 9 and clothing firm Joules Group (USD113mn) on May 23. Such deals show that at a time when the European IPO arena is enduring a dearth of deals as the dust settles on the UK's Brexit vote, there remain signs of life in the struggling IPO backdrop ( see ' Ding Dong, The European IPO Market Is Not Dead ' June 8).

Biggest Is Not Always Best
Y-T-D UK IPOs: LSE vs AIM By Deal Vaue, USDmn
Source: Dealogic

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