Life after the stock market
Article Date: Jan 22 2009
Simon Holden, Faegre & Benson
Public companies are delisting in their droves. Simon Holden, an associate at law firm and AIM adviser Faegre & Benson, explores the reasons behind the trend and the other options for those struggling to raise finance.
The Dickensian image of Oliver asking for more is analogous to the current plight facing companies as they attempt to source capital to continue their operations. The continuing trend of publicly quoted companies, most notably those listed on AIM, seeking a delisting of their shares is a worrying sign of the times.
Delisting is neither a new nor recent phenomenon, nor is it one restricted to our shores. But the state of the economy means it is now an option being seriously considered by the boards of many public companies whose low market capitalisation, illiquid shares and need to conserve cash all create a strong case for going private. Unlike financing options available for smaller quoted companies, recent examples of delistings are in plentiful supply.
Chinese mobile phone products and service provider EBT Mobile delisted from AIM on 17 December. On 19 December, CMR Fuel Cells announced its intention to delist from AIM in March 2009, subject to shareholder approval. Sheffield United delisted from AIM on 7 January 2009, citing low liquidity in its shares and a fall in their value caused by the economic turmoil as reasons for delisting. Stockbroker IAF Group delisted from AIM on 30 December, its reasons for doing so mirroring those of Sheffield United.
Obtaining exact figures for those delisting can be difficult, since an AIM company acquired by another AIM company is said to have “delisted” its shares although the business remains in the quoted arena. Companies that change their name, or reverse into themselves, can also be erroneously added to the numbers delisting. According to figures from The AIM Guide, 193 companies left the market altogether in 2007, compared to 203 in 2008. So far this year, there have been 19 delistings, more than one for each working day.
If you look at the net number of companies joining the market (that is, new issues minus delistings) an even stronger trend emerges. AIM saw a net gain of 17 companies during 2007, and a net loss of 134 in 2008.
Plan B
Although AIM continues to perform a vital role for smaller companies that want to raise capital, it is unlikely to be suitable for all companies in the current climate – for example, those companies which came to market off the back of the venture capital-backed boom are ideal candidates to delist. But for those wanting to seek an alternative to delisting, there are some options worth exploring.
The PLUS-quoted market has come to be seen as a viable alternative for AIM companies citing the cost of maintaining a quotation as a reason for delisting, as it is significantly cheaper than AIM. For companies citing a lack of liquidity in their shares, there is also the option of trading on the PLUS platform.
Despite falling overall numbers, there remain a large number of cash shells quoted on AIM and PLUS, ranging from those with a couple of hundred thousand pounds to those with several millions, which are in the business of looking to make investments. Listed companies should seek these out and pitch to them.
In conclusion, whilst it is clear that tough times lie ahead for publicly quoted companies, there are options available to those who wish to invest time in exploring them. This year will prove to be survival of the fittest in terms of which companies remain on the markets, and a public quotation may well be something to be revered when the good times return. For those optimists amongst us, you can take heart from the recent example of Amur Minerals, whose shareholders, in a general meeting held on 22 December, refused to approve a resolution for delisting the company’s shares from trading on AIM.
