Listings: corporate lawyers' warning as number of companies admitted falls by 11%


A record amount of money was raised on AIM in 2006 but the number of instructions for law firms is falling, corporate finance lawyers have warned.



Companies on London's junior stock exchange - previously known as the Alternative Investment Market (AIM) - secured some £15.7 billion last year, up from £8.9 billion in 2005.



But the number of companies admitted fell by 11%, with 462 companies joining compared to 519 in 2005. The number of international companies admitted to AIM increased by four to 124.



Lesley Gregory, a corporate finance partner at City firm Memery Crystal, told the Gazette that the market for initial public offerings (IPOs) began to dip from summer 2006 onwards. She said: 'Some institutions were shying away because certain AIM-admitted companies had underperformed in the first half of the year. And then the herd instinct took over. Once one institution gets cold feet, others follow suit.'



According to Ashley Reeback, head of corporate at London firm Finers Stephens Innocent, the failure of these companies highlighted the need for stricter vetting processes. He added: 'Better regulation for nominated advisers is a good thing, but the effect has been to scare off smaller companies - the less than £10 million deals - that might previously have come to AIM.'



Julian Stanier, a corporate finance partner at City firm Norton Rose, identified two further reasons why AIM had become less popular with investors over the last 12 months. He said: 'Six or seven of the internet gambling companies on AIM have taken a bad hit with the recent change in US legislation governing online gambling. And then some of the very biggest AIM-listed companies are in mining or oil and gas. Oil price fluctuations and the fall in metal prices mean they have taken a severe knock.'



The fall in admissions is also likely to continue if regulators begin to enforce due diligence more stringently, Stringer Saul corporate finance partner David Smith predicted.



He added: 'The total money raised continues to grow because the average value of an IPO has grown, endorsing the view that bigger companies and international corporations are coming to AIM in increasing numbers - while smaller companies and the number of individual transactions are falling away.'



The biggest IPO on the junior stock exchange last year, according to the London Stock Exchange, involved Indian real estate business Hirco, which raised £360 million.



Jonathan Rayner