In last year’s introduction to the Aim 100 review we pointed to “the growing maturity” of many of the companies trading on London’s junior market. But respectability comes at a cost. While you might argue that the overall quality of Aim-traded stocks has improved, you would have to concede that it has been largely down to increased attrition.
The end of a long-running commodities boom and reduced institutional funding in the aftermath of the Lehman Brothers collapse fed through to a market shake-out, with junior resource companies bearing the brunt.
A fall in the number of nominated advisers (Nomads) willing to serve the market also had a negative effect on numbers, as constituents were obliged to formally appoint one. If that could not be arranged, then companies had no option but to de-list.
Through 2007-10, the number of companies trading on Aim fell by 29 per cent, while capital raised from primary and secondary issues decreased by 57.6 per cent.
The long-term viability of the market was consequently brought into question. But it was that very shake-out, often of chronically undercapitalised and illiquid stocks, that, along with favourable changes to the dividend tax regime, led to a resurgence in the Aim secondary market.
Average daily volumes peaked in 2017. But the current rate still represents a fivefold increase on 2008. So even though we have witnessed a marked decline in the number of initial public offerings on Aim, partly a consequence of the low interest rate environment, this is set against narrowing spreads and improved price discovery.
Investors would probably have been oblivious to the improved trading function as they unloaded their positions once the impact of Covid-19 started to crystallise. From 20 February, the date at which the outbreak took hold in Italy, through to the trough on 18 March, the value of the FTSE Aim 100 index fell by 39.7 per cent. The index has retraced substantially in the intervening period, although it is still down by around a fifth on the February reading.
The ability of companies to trade efficiently during the current lockdown varies from sector to sector, but it will be illuminating to discover how many of the constituents had developed adequate cash buffers to see them through the crisis – it is not as though we haven’t been here before.
When inter-bank financing almost came to a standstill at the time of the global financial crisis, one of the more troubling aspects to emerge was the low levels of working capital held by financial institutions.
Regulatory issues notwithstanding, the ability to simply fund day-to-day operations was being stymied by excessive loan-to-deposit ratios. It meant that high-street lenders such as Northern Rock and Alliance & Leicester could only cover their operational costs for a matter of weeks – a glaring failure of risk management.
Those capital adequacy issues have not gone away – and they could well precipitate another shake-out. They are now being felt across the board, although eased to an extent by a contentious move by the Financial Conduct Authority to water down the rules for UK companies trying to raise money from existing shareholders – beware your pre-emptive rights. Minority shareholders might be in for a shock when they discover that some of their Aim holdings have been diluted, quite possibly by capital issued at a sizeable discount in these troubled times.
| Aim 100 2020: 100 to 51 | |||
| Ranking | TIDM | Company name | 1-year change (%) |
| 100 | ESL | Eddie Stobart Logistics | -91.8% |
| 99 | LGRS | Loungers | -56.9% |
| 98 | BMN | Bushveld Minerals Limited | -48.0% |
| 97 | PMI | Premier Miton | -57.3% |
| 96 | AFM | Alpha FMC | -19.8% |
| 95 | ATYM | Atalaya Mining | -49.3% |
| 94 | PURP | Purplebricks | -72.0% |
| 93 | TCM | Telit Communications | -37.8% |
| 92 | GTLY | Gateley | -2.5% |
| 91 | PEBB | The Pebble Group | - |
| 90 | MRL | Marlowe | -5.5% |
| 89 | MTW | Mattioli Woods | -9.1% |
| 88 | TRMR | Tremor International | -1.0% |
| 87 | SCPA | Scapa | -70.0% |
| 86 | TRCS | Tracsis | -8.0% |
| 85 | JSE | Jadestone Energy | -4.2% |
| 84 | HZD | Horizon Discovery | -45.5% |
| 83 | BMK | Benchmark | -25.0% |
| 82 | ASY | Andrews Sykes | -11.4% |
| 81 | CREO | Creo Medical Limited | -31.3% |
| 80 | CAM | Camellia | -24.6% |
| 79 | GHH | Gooch & Housego | -30.1% |
| 78 | NUM | Numis Corporation | -4.4% |
| 77 | SQZ | Serica Energy | -24.5% |
| 76 | SUMO | Sumo Group | 29.5% |
| 75 | WHR | Warehouse REIT | -4.0% |
| 74 | PAF | Pan African Resources | 48.6% |
| 73 | CHRT | Cohort | 55.7% |
| 72 | WAND | WANdisco | 13.1% |
| 71 | CAML | Central Asia Metals | -39.0% |
| 70 | VCP | Victoria | -59.2% |
| 69 | DOTD | dotdigital | -0.8% |
| 68 | BRK | Brooks Macdonald | -17.1% |
| 67 | KAPE | Kape Technologies | 108.2% |
| 66 | APGN | Applegreen | -39.2% |
| 65 | ABDP | AB Dynamics | -20.9% |
| 64 | TUNE | Focusrite | 7.1% |
| 63 | IMO | IMImobile | 3.1% |
| 62 | MPE | M.P. Evans | -13.4% |
| 61 | NFC | Next Fifteen Communications | -35.4% |
| 60 | HUR | Hurricane Energy | -75.7% |
| 59 | RQIH | Randall & Quilter Investment | -24.4% |
| 58 | IQE | IQE | -52.4% |
| 57 | JDG | Judges Scientific | 53.2% |
| 56 | KETL | Strix | 11.8% |
| 55 | KGH | Knights Group | 23.2% |
| 54 | TFW | FW Thorpe | 3.1% |
| 53 | MAB1 | Mortgage Advice Bureau | -3.2% |
| 52 | HOTC | Hotel Chocolat | -8.8% |
| 51 | POLR | Polar Capital | -31.6% |
| Source: S&P Capital IQ; ranking accurate as of 27 Mar, price moves accurate as of 1 May. | |||
In the links below you will find our round-up of the constituents of the Aim 100, as it was configured at the end of March. Our survey of the index’s 50 largest stocks will follow next week.
