Fall in market cap but still high by historical standards
The total market cap for AIM companies suffered its first six monthly decline since the second half of 2014, falling from £110.8bn at June 2018 to £91.3bn at December 2018, a decline of 17.6%. For the year as a whole, AIM market caps declined by 14.6%. In percentage terms, this was the largest decline since 2011 (21.7%).
The average market cap per company declined by 15.4% in H2 2018 from £117m at June 2018 to £99m at December 2018.
However, putting this into historical context, it is still the second highest year end market cap for AIM since 2007. In addition, the average market cap per company of £99m is the second highest year end average in AIM’s history after 2017 (£111m).
The total number of AIM companies continued to decline. At December 2018, there were 923 on AIM compared to 944 at June 2018 and 960 at December 2017. This is the lowest year end number since 2003.
There were 29 joiners in H2 2018, substantially lower than the five year average of 39. Despite the number of leavers (50) being slightly lower than the five year average (55), the net reduction of 21 companies is higher than the five year average of 16. The net reduction of 21 was the highest six monthly reduction since H2 2016.
For 2018 as a whole, the net reduction was 37 (2017: 22), slightly higher than the average net reduction over the last five years of 33.
Among the 29 joiners in H2 2018 were 14 IPOs – substantially lower than the five year average of 25. Numbers were clearly affected by market volatility, with no IPOs in September and only one in October. However, there was a glimmer of hope in December which saw some activity with five IPOs (three in financial services and two in software and computer services).
For 2018 as a whole, there were 64 new admissions, down on the 80 seen in 2017 but the same number as in 2016.
Although AIM clearly had a difficult second half of the year in 2018, it has not performed as badly as the cocktail of risks it faced might have suggested. Market values are still relatively high compared to historical levels and 2018 as a whole still saw a steady stream of new joiners. In our view, AIM is still a very viable market for well run companies with good business models and strong investment stories in the right sectors.