Junior market feels the effects of China slowdown and commodities rout as IPOs and M&A plunge
IPO and M&A activity on AIM have plummeted to the lowest levels since the recession, as jitters over China deter investors.
In the last quarter there were just three mergers, down from 13 in the same period in 2014, and 20 in 2010.
There was a similar drop in IPOs: just seven companies floated on the market over the last three months, compared to 19 the year before. Money raised by IPOs was down £1.2bn, or 52 per cent.
One company that choose to take a chance on the stormy markets over the summer was model train brand Hornby, which listed and raised £15m in August.
Accountants UHY Hacker Young, who commissioned the data, puts the trend down to a far higher exposure to mining companies on AIM than in the main market, which makes it far more vulnerable to volatility as a result of China’s slowdown and the resulting fall in commodity prices.
Laurence Sacker, partner at UHY Hacker Young said: “When FTSE 100 commodity companies begin to struggle, investors will inevitably steer clear of their far smaller peers on the AIM market.
“The financial turbulence in China has hit AIM activity particularly hard as there has been a flight to more stable blue chips and in particular away from resource and mining companies – where AIM has built such a strong representation.”
Britain's junior market has also suffered from a spate of big companies withdrawing their services as mandatory nominated advisors (NOMADs) fearing reputational damage and seen 13 companies de-list in the last three months alone.