RE: Exodus from Aim leaves chorus of questions in its wake13 Apr 2024 08:47
Mark Slater, the chairman of Slater Investments, a fund manager that has a bias towards smaller listed companies, said: “The narrative around the UK is focused on FTSE 100 companies moving their listings overseas, but underneath that the market is extremely unhealthy. The small caps and Aim are being hollowed out. The market is structurally very unsound and I don’t think that’s appreciated. There’s nothing replacing these smaller companies.”
A dearth of new companies coming to the market through initial public offerings prompted a stark warning last week from Charles Hall, the head of research at Peel Hunt, another broker, that the FTSE Small Cap index, a more senior marketplace to Aim, “will cease to exist by 2028 at the current run-rate. The pace of de-equitisation is relentless and will inevitably continue, given the low valuation accorded to UK companies.”
The problem of weak valuations is behind C4X’s decision to take the company private at a meeting on Monday. Clive Dix, 69, its chief executive and the former deputy chairman of the Covid-19 vaccine taskforce, said: “We believe we should be valued at least five times, if not ten times what we are and therefore raising money at ten times the value would be much simpler. I don’t think it’s to do with the quality of the companies and the science. I just think that the environment, it doesn’t work. There’s no liquidity.”
Yet Stuttard said the wider issue of so-called de-equitisation was something facing stock markets globally. “I think one of the reasons it’s probably more visible at the moment is because markets are not having the same level of top up of new companies coming through.” He added, however, that the “pipeline of initial public offerings is picking up”. Indeed, Helix Exploration and European Green Transition both joined Aim this week and their share prices have risen. Stuttard also noted that 37 per cent of all equity capital raised in European Union growth markets in 2023 had been raised on Aim.
Despite his confidence, he wants to see pension funds and other big institutional investors start taking on more risk again. The biotechnology sector is particularly exposed to the lack of appetite for risk, an issue that, according to Dix, has meant Aim has “just never ever worked as the place for growth biotech companies that are very cash-hungry in their early days”.
Despite striking three big deals with leading pharmaceuticals companies, including AstraZeneca, Britain’s biggest drugs group, C4X shares are down more than 90 per cent since they were listed ten years ago, valuing the company below £23 million. Similarly, shares in Redx, a cancer drug developer, are down by more than 90 per cent from their 2015 listing, despite establishing four “major” partnering deals over the past five years.
Daniel Nickols, an investment manager focused on UK small and mid-cap equities at Jupiter Asset Management, said regulators, policymakers and
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