The Alternative Investment Market (Aim) of micro-sized businesses is on course for its best year for new stock listings since the financial crisis, as confidence in markets picks up, a fund group has said.
Research from Cavendish Asset Management found 58 new companies had made an initial public offering (IPO), where shares were made public for the first time, on the Aim index in the first nine months of this year. This was the largest number seen in seven years.
But the number of new stock listings on Aim was still significantly behind the levels seen before the financial crisis, which Cavendish described as a “frenetic period” that reached its zenith with 335 IPOs in 2005.
The new stock listings were dominated by companies in the consumer discretionary, information technology and industrials sectors, which collectively accounted for 64 per cent of new Aim listings.
Cavendish said: “The proportion of listings in the industrials and information technology sectors is not too dissimilar to their weights in the FTSE Aim All-Share index.
“However, the prominence of the consumer discretionary sector is perhaps the most notable.
“Whilst the consumer discretionary sector accounts for just 13 per cent of the FTSE Aim All-Share index, a significant 26 per cent of this year’s Aim IPOs have been in the sector.”
The research also found that the newly listed stocks on Aim have significantly outperformed the broader index so far in 2014.
Companies that had their IPOs this year have delivered investors average returns of 5 per cent in the first nine months of 2014, compared to a 16 per cent decline in the overall FTSE Aim All-Share index.
The research found new companies on Aim saw their share prices rise an average of 12 per cent on their first days of trading this year, and “had retained that 12 per cent gain 30 days after listing”.
Peter Renton, an equity analyst at Cavendish, said the reason the new IPOs had only risen by 5 per cent overall so far this year was because the “recent dip in the market has inevitably led to these companies giving up some of their initial gains”.
The star performer was biotechnology firm 4D Pharma, which delivered a 230 per cent return between floating in February and the end of September.
On the other side, suit maker Bagir was the worst performer, falling 78 per cent after it announced it had lost a contract to supply its main customer M&S.
Mr Renton said the case of Bagir highlighted how “small companies can be especially sensitive to one particular corporate ‘event’, which can have a significant impact on the share price”. He added that investors looking to access Aim IPOs had to be very careful which companies they bought into.