There is stagnation in the AIM market and I am not that sure there is a will to make the market woek we have reached the point of total apathy and interest. But there are great little undervalued gems out there but one has to be nibble to avoid the ones that are destined for failure. There is no appetite for investing in the bombed out AIM sector as some shares are trading well below their par/nominal value and could not raise funds for anything even if they wanted too, so I would imagine a raft of share restructures being announced.
The market continues to have no appetite for AIM stocks, however that could all change on a sixpence should those unlisted companies pounce on the bombed out sector and pick off undervalued targets. The Corporate costs and efforts involved in initial public offering ("IPO") make the exercise not worth the bother in the current economic climate. So a cheaper alternative is to pounce on a Co that is already listed and has all the hard listing work behind them on the relative cheap. I am continuing to watch several listed outfits that are prime targets and I'm watching unusual share trading patterns like a hawk, usually indicated by persistent good quality Director buys and third parties suddenly taking a keen interest, increasing holding in the prospective target. Corporate financiers and businessfolk are a canny breed and know where the prey is and quickly find it so keeping all senses peeled and will mimick their moves.
Suggestions are that some 40% of AIM stocks are in a distressed state and may not survive the current economic climate as AIM is being shunned by investors for safer harbours where raising finance is easier. Many AIM stocks cannot raise funds as their share price is below par value and restructuring of the capital base is the only option slamming the door on the very market AIM relies on, the private investor.
All normal rules about investing opportunities amongst small market capped AIM stocks have been thrown out with the bath water. Fundamental and technical analysis rules are not being followed most being dismissed. Some magnificent stocks with potentially corporate life changing developments are being under priced by the market and given scant respect by the "city". Most if not all of future development in exceptionally strong performance perceived stocks are being ignored, even on strong corporate news output and in some of the future mouth watering prospects of tiddler stocks punching above their weight. This shortsightedness is adding to the uncertainty and stifling investment and fund raising leading institutional investors unhappy about investing in "certainties" leaving otherwise long strong performers floundering through lack of development funding. That is why I am now looking at those companies that have a mix of Board members, and who are recruiting bods from a fund raising background, who are experienced in the workings of the "city" and Corporate Finance. SXX springs to mind for the long term 2017 onwards but current share price is very much underpinned by prospects, SXX cannot and will not go the distance alone and massive investment will be made in this significantly unervalued player. PINN is another stock which in my mind has been totally ignored but has and is performing beyond all expectations but the share price languishes in lows and has not yet reflected the past material business growth. There are plenty of others in the "Hotties" list that could potentially deliver up mouth watering returns.
Self destruct button. Both France and Greece have one finger on the self destruct button if they continue with their anti austerity measures. Greece has just a few days left before it leaves the Euro and France realises the harsh reality of last weeks euphoria after electing a spend today worry tomorrow Government. AIM will suffer even more in the fallout as a direct result of all this uncertainty even more so now that the investing world is rattled and uncertain of Corporate European and UK direction.
With hardly any companies floating on the junior market and very little takeover target there has to be some fallout and it will be major. We will see a raft of companies exiting the market as funding becomes impossible and the greedy market manipulators increase their advisory fees and the bouses increase their listing fees too. Not many companies can no longer afford the £30,000 upwards listing expenses, for what? they are getting nothing in return. Many share prices are near to or below par/face/nominal value and so are no longer in a position to tap the secondary offering route. My guess is there will be an explosion in unlisted companies with a business model that lends itself to non debt financing and are hunting the market for undervalued plays and will use that as a platform to bid them out and as a cheaper alternative than going the full hog of prospectus way into the market. So by looking at companies that are beefing up their corporate experienced board and shares that appear to have an increasing unlisted company shareholdings this would suggest a stalker and defence strategy developing. But what do you think?
Last footprint addendum. With very few directors increasing their holdings and some reducing to pay tax bills and divorce settlements but options being banded about left right and centre with little hope of being excercised but look good to the market!. I really cannot see any visible increase in confidence. But as long as private investors continue to average and cfd is in full swing those that facilitate the market will continue to bring home massive profits and thus personal bonuses whilst those at the bottom pay the tally man. The Government wants to encourage private investors in getting involved in a stagnent market stifled of funding as they get stamp duty out of every purchse and road tax and vat tax on every chelsea tractor bought in the UK. A cynical approach but unfortunately a fact of life.
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