AIM4Tech

Nothing like the prospect of death for concentrating the mind!

It was the famous English pundit - F.E. Smith who coined the astute observation in today's headline. And as the economimc world slowly melts down, history tells us that excitement about the prospect of IPOs will be replaced by scrambles for secondary capital and a general hunkering down where anything to do with capital markets is concerned. Accordingly I expect Aim4tech to join the rest of the market in the bunker while the planet travels through the storm of storms. However, even in a storm, accurate climatological measurement is vital and so the blog will go on to maintenence mode,providing monthly data until things pick up. From now on, we will show two graphs each month:

1. AIM market activity showing listings and, more importantly, money raised;and
2. hens' teeth - or rather IPOs - whenever there are any!

For this first tick-over month we'll show the year to date IPO slides before it gets easy and remember to click on a slide to zoom in. Here's to a V curve and a soft landing!

Happy New Year! - Stars & Stripes AIM Companies > Maple Leaves For 1st Time!

Happy New Year!

That’s it – 2007 is officially in the past. The turkey's finally joined 2007 in the waste bin of history (figuratively for me at least – I’m a vegetarian). And it’s time to look forward and figure out what 2008 holds in store.

Among the second order Christmas gifts I received was a desk calendar. For those unfamiliar with the term - a second order gift is one for which the following formula is true:

Where y = the gift and x = the giver.

That is to say that it’s a gift to which neither the giver, nor the receiver gave any thought. Which, given that it’s supposed to be the thought that counts, is rather sad!

Anyway, my desk calendar is a prime example of the genre: a dull block of recycled paper with each page carrying the date and an uplifting quote.

January 1st is a real corker:

“I dreamed impossible dreams. And the dreams turned out beyond anything I could possibly imagine. You know, from my point of view, I'm the luckiest cat on the planet.”

Just as you reach for the sick bag it turns out that these pearls are from none other than Hugh Heffner and there’s not a red-blooded male over the age of 45 who knowing precisely which dreams he’s referring to wouldn’t concur with his conclusion!

But I don’t want to get carried away (leave that to Hugh’s dreams). Before I return to the prospects for the tech industry in 2008, it’s worth checking out the quote for January 7th (doesn’t everyone read ahead on desk calendars?)

“We're going to try and recruit the very best people we can and produce the best papers we can, and publish them to the highest standards we can.”

That was attributed to Conrad Black who, it has to be said probably shares the turkey’s views of 2007 with not much prospect of 2008 being any better for him. Or 2009 or 2010 or 2011 although 2012 holds out some prospect of an uplift subject, of course, to good behaviour

So if Conrad defines the floor and Heffner the ceiling, it’s easy to feel top quartile about the year ahead.

At the core of my confidence is the relief of seeing America rediscovering how to be American.

With the Big Election approaching at speed, every corner of the 50 states is digging into its folk memory and pulling out streamers and marching bands and ticker tape. And the world is drinking deep as the planet’s TV screens show millions of real people whooping and screaming and doing what America does best – getting on with being optimistic.

This flies in the face of the economic naysaying pundits who try never to let a day go by without finding some sign or other that ‘proves’ the US is in a recession. And that, they confidently assert spells trouble for the rest of the global economy: because as everyone knows –

“When America sneezes, the world catches a cold”

Unfortunately, no one has told the good entrepreneurs of India and China that they’re supposed to be slowing down and their growth continues apace. And anyway, learned economists are now beginning to decouple America’s economic fortunes from those of the emerging economies.

If you are interested in the hypothesis, check out the Economist’s well-argued piece which certainly convinces me that China will grow at 8% or 9% even if hell freezes over.

Closer to home the near term future of the IT industry looks good too. Although cousins of the same pundits continue to devise ever more creative ways of linking the sub-prime meltdown to an inevitable demise of IT budgets, the major industry players are sticking to their 2007 guidance numbers.

This means that customers were still buying in their droves through the eye of the sub-prime storm when they should have been at their most nervous and while the market may shift towards cost saving rather than innovative solutions, there are, as yet, no sign of a major slump in 2008 revenues.

Personally, I haven’t felt as bullish as this for ages.

As regular readers of aim4tech will know, my life is spent with one foot firmly planted in technology and the other in the global capital markets and Christmas came early for me in 2007.

In mid December, ENRC – a mining and minerals company on whose Board I just joined – raised $3bn in an oversubscribed IPO on London’s main exchange.

This was good news for many obvious reasons and one less so.

ENRC is a business that is a bleeding edge exemplar of Thomas Friedman’s assertion that the World is Flat. Most of our assets are in Kazakhstan, our sales office is in Switzerland, our major customers are in China and Russia and we are subject to the regulatory regime of London!

Being part of the crew as we charted our way through the choppy waters of the IPO has given me first hand current exposure to just how London’s principles-based approach operates when it’s on steroids, comfortably accommodating all-comers so long as they are prepared to eschew centrally controlled economies and respect the power of the market.

With that particular wind at my back it’s perhaps no surprise that 2008 looks rosy. But I would add another 2007 phenomenon to my jolly bag.

Last year, as the following chart shows, saw the number of US companies listed on AIM climb above their Canadian cousins for the first time!

Admittedly it’s not a landslide– there are nearly 1800 companies listed on AIM – but the combined total for the Stars & Stripes of 46 beats the Maple Leaf’s 44 into second place.

But it must mean something - hopefully thebeginning of a trend....

A good thought for 2008 and food for anyone’s New Year resolution!

Lies, Damned Lies & The Truth Of AIM's Statistics: Results H1 2007

When I spoke at the Reverse Merger 2007 Conference in San Francisco last month, I kicked off my Panel with a slide depicting the three greatest lies and their authors:

The more astute amongst my readers – hopefully a large number – will notice that there are actually four lies on the chart. This was a joke that I thought was immensely funny in California – ie even the number was a lie – but I’m afraid that it only served to confuse my audience who were there for the serious business of finding ways to avoid a straight IPO on Nasdaq and weren’t in the mood for humour.

The London Stock Exchange (and owner of AIM) has just released the data from the first half of 2007 which add further proof – if more were needed – that the top two Great Lies are just that that – lies.

To understand my confidence in that claim, it is necessary first to take a look at the size and shape of AIM measured by the market’s overall capitalization, the number of companies on the market and the amounts of money raised for how many companies.

MARKET CAP

As you will see from the table, the geometric growth of the market is captured in its total value of $215bn.

Smaller than Nasdaq is today, but hardly irrelevant!

Although this was calculated at the embarrassingly high conversion rate of $2 to £1 (which, by the way, makes a Starbucks Skinny Grande Latte cost $4.50 in London!) the conversion rate is constant throughout the table and so the comparisons are not skewed by exchange.

For those interested in trajectories, that $215bn is double the closing value of 2005 ($107bn) and four times the aggregate market cap at the end of 2004 ($60bn).

NUMBER OF COMPANIES LISTED

At June 30th 1,656 companies were quoted on AIM – twice the number at the beginning of 2004. And, although it’s not shown on the chart, 600 of that 1,656 had a market cap greater than $75m – the SEC’s SOX cut-off for small companies.

AMOUNTS OF MONEY RAISED

Great tales of scale are always interesting, but not particularly relevant if you are the leader of a company – all you care about is “what’s in it for me?”

The same chart gives a clue to the answer if you take a look at the sheer waves of money raised on the market – nearly $20bn so far this year. And, more importantly, the majority of it was in secondary (further) rounds showing the maturity of the market’s liquidity profile.

AIM is clearly in its stride as ‘safe’ market for earlier stage companies – ie Sandvine and OCZ rather than Microsoft and Motorola.

But as important is the data that supports the market’s claim to be

"The most successful growth market in the world."

This next slide shows how AIM has evolved from its origins as a largely domestic exchange to welcoming an ever-increasing proportion of international companies to its ranks - 28% in the first 6 months of 2007.

Of even greater interest to tech company heads is how much money is raised for each IPO.

The answer is an average of $48.5m in the first six months of 2007 which is consistent with, although marginally up on the last 18 months average of $44m, as shown below:

And the last question answered firmly by the first half’s numbers is “What’s the liquidity like?”

This is always the thorny one because, as every American student of AIM knows, this is supposewd to be AIM’s Achilles’ heel.

Well, be prepared to be shocked (again!) as the last slide shows – it may well once have been true that liquidity was volumetrically low – but not since 2003.

An average of 550m shares worth $460m traded daily from January to June this year.

It was a cynic of another age who once dismissed numerical analysis with the throwaway line

"there are lies, damned lies and statistics".

But even he would be hard pressed to defend the three greatest lies (or four if you haven’t been following) in the face of such overwhelming statistics.

That being said, the tech world is full of cynics, so if any of my readers are interested in challenging the conclusion that AIM is
a) alive & well,
b) welcoming to non-UK companies and
c) a place where significant funds are raised for companies that go on to grow rapidly after years of imprisonment in private hands,
go run your own slide rule over the numbers –they’re to be found here.

And then ask just why only 13% of the International companies listed on AIM are from the USA.

Beats the heck out of me!

Reversing the US Tech Sector’s Vasectomy - Q1 2007 AIM Data Available

Amidst all of the transatlantic bickering about AIM it is easy to lose sight of the fact that it has become a vibrant market demonstrably catering for the needs of the younger company.

Just like Nasdaq used to do in the 80s and 90s.

Sadly, although non-UK companies account for over 25% of the IPOs on AIM, the US is still noticeable by its absence.

It’s just like international soccer before the US hosted the World Cup!

The absence of any material American presence on what is patently the only market for IPOs today begs a very big question – where are they all going?

Has the US emerging tech sector undergone, what I heard described the other day as the capital market equivalent of a vasectomy?

Oodles of potential - all going nowhere?

At the root of the sector’s reticence lies a fundamental lack of knowledge of the scale and opportunity presented by the market.

To prove my point, answer the following three questions:

1. “To the nearest 10, how many companies are listed on AIM?”

2. “To the nearest $10m, what is AIM’s aggregate market cap?”

3. “To the nearest $5m, what was the average sum raised by an AIM IPO in Q1 of this year?”

To answer these and your other questions, take a look at the following data, hot of the London Stock Exchange’s databases.

To get an understanding of AIM’s scale, click on the following chart:

It shows the inexorable growth of AIM from its first wobbly start in 1995 to today’s behemoth.

And for those who are counting you will see that there are over 1600 companies listed on AIM with an aggregate market cap of $192bn (the £ is converted at $1.89 through these data).

Although AIM was a decidedly domestic market in its early days, the percentage of international companies joining has steadily increased, jumping up a level in 2004, as shown on the chart above and illustrated graphically on the next slide:

Last year was a very big year for the market with 462 companies IPOing in London. The pattern of activity showed a vague cyclical behaviour as shown below:

And it can be seen that although the City is awash with rumours of an impending tode of IPOs, so far 2007 has been relatively quiet.

Liquidity is always a big issue – along with the so-called lack of regulation it is one of the Big Two Lies about AIM perpetrated by the US bankers who would rather see young companies starved of capital than IPO abroad.

The next charge shows that not only has AIM been liquid for a long time – 2000 was the year that the volume changed – but that today’s volumes vastly exceed the height of the dot.com boom.

Admittedly the levels are far below those of Nasdaq but there are many reasons for that (not least of which is the absence of any of the big staple companies that now populate Nasdaq). The real issue for liquidity is whether or not a company can raise capital when it needs to – how healthy is the secondary market? And the answer to that can be seen on the first chart which shows that “Further” fund raisings exceeded “New” in the 1st quarter of 2007.

Equally importantly, the daily trading volumes have been rising steadily both in numbers of shares and $ volume.

All of which bring s us to the answer to the third question - $20m.

This final chart shows that the average funds raised has remained pretty constant over the last 15 months although at the back end of 2006, the average shot up to $30m.

In summary then, there is liquidity, regulation and a warm welcome in London for those tech companies who are prepared to put the interests of their shareholders ahead of some vague idea that someone, somewhere is about to slay the Four Horsemen of the Apocalypse and open up Nasdaq for business again catering for young, vibrant companies as they embark on the journey to become truly global leaders in their field.

AIM 2006: Flash Results. 2007 Predictions

Today’s FT carried a carried a short piece confirming the likely outturn for AIM in 2006.

The headlines are:

New Companies – 432

IPOs – 261

Money Raised – $26bn (£14bn)

Money Growth Over Last Year - 54%

At the same time, the New York Times carried an article confirming what aim4tech has been predicting for months, namely that 2007 will see a flood of US companies making their IPO debut on AIM.

The Times cited the NVCA Annual Predictions Survey released on Monday, the relevant piece of which said:

More than half of VCs surveyed (57 percent) believe there will be a greater propensity for U.S. venture-backed companies to consider overseas IPOs next year.

Sadly, the continuing state of denial within the US VC community reared its ugly head again when the President of the NVCA - Mark Heesen - was quoted as saying:

"Is AIM basically going to be the pink sheets of Europe, or really be an exchange?"

I note that Mark has been in the job since 1991; for most of which period Nasdaq ruled the world. But, as a voice of experience from the Old Empire, I can confirm that change is always inevitable - and denial is the curse of opportunity!

Now, last time I looked (August) there were around 250 tech companies on the OTCC with a combined market cap in the region of $10bn.

Which puts AIM into context. Or, put less politely:

which bit about the $26bn does Mark not get?

But that's a subject for another day.

For today, I'll settle for the following from David Blackwell of the Financial Times:

"the statistics for the full year will show that much of the negative publicity surrounding Aim for the past six months should be discounted. For it has notched up another record year"

And from Dixon Doll, founding general partner with DCM Doll Capital Management who, in the context of American companies seeking an IPO abroad, said in the New York Times:

"The only realistic scenario is a U.S. company doing a listing on AIM or on the London Stock Exchange "

Amen! I'll drink to realistic scenarios!

Here's wishing you a really prosperous 2007!

What’s The Average Price Of An AIM Share?

I spoke at an SVASE conference in Mountain View earlier this year. The audience was a group of entrepreneurial Valley CEOs and they had turned up for a buffet lunch and an introduction to London’s AIM exchange. Our hosts – Fenwick & West – provided a very convivial environment and the occasion was interesting both anthropologically and commercially.

From an anthropological perspective, it was worthy of note that while CFOs seem exclusively to attend breakfast meetings on AIM, CEOs obviously prefer lunch.

But I digress; back to the event. The evolutionary stage of the dozen or so businesses there, ranged from early prototypes to seriously established companies.

After my presentation which I shared with a British attorney – Andrew Gowans of Osborne Clarke (who uniquely for British law firms has a non-practicising ambassadorial office in Palo Alto with the express purpose of providing European law support in California) - we opened up for Q&A.

The questions were as wide ranging as the companies. The prize for the oddest went to the one I have chosen as the title for this blog.

What’s The Average Price Of An AIM Share?

I have to admit that it stumped me.

Not because I don’t know the answer – I don’t – but because not only do I have zero interest in the question, I can’t imagine what motivated the poor man to ask it. As I pointed out on the day, knowing the average price of a share would be about as beneficial as knowing that of an apple in your local Farmers’ Market – totally useless.

However, with hindsight, I fear that I may have been a little harsh. There clearly is a lack of easily accessible data about AIM which, were it available would have enabled the poor man to have answered his own questions in private and so avoided the embarrassment of asking it in public.

Perhaps what he really meant to say was that the absence of data leads to the formation of rumours and innuendo and unfounded conclusions – one of the best of which is that there’s no liquidity on AIM (see my earlier blog on this subject)

So now I feel contrite – perhaps my answer should have been less New York and a bit more California or even just plain British polite .

I certainly know from the look on his face that he found the Farmers Market metaphor confusing and I just took advantage of the moment to move on, rather than to feel his pain. So, to atone for my peevishness, I have resolved, well ahead of the New Year, to make amends.

I therefore hereby resolve to publish a summary of the key AIM market statistics, each month, and to top them off with a quarterly summary.

To catch up with what’s happened since aim4tech was launched this blog contains October and December’s update.

The focus of the analysis will be IPOs – how many, what type, where they’re from, etc.

Before I show you October’s data it’s probably helpful to have some background.

As shown in this first chart, by the end of September there had been 330 new companies listed on AIM of which 242 were brand new IPOs (rather than emigrants from the other market, or re-entrants after having been suspended while executing an acquisition, reorganisation or the like).

The IPOs of that period had raised, in aggregate, $11bn

In October a further 26 IPOs occurred, raising $1.7bn.

And November saw 20 more debuts who collected $1.6bn between them.

As a side comment, it has become commonplace in the media to talk of AIM “slowing down” with the implication that the window of opportunity is closing.

Well, call me old fashioned, but I would say that if 46 IPOs and $3.3bn represents slowing down, I’m all for gentle walks!

The real question though, is not how big the market is; but rather what kind of climate exists for technology companies and US-based businesses.

The next two charts answer these questions.

$326m raised by 14 tech companies with a combined market cap on IPO of $3bn.

Interestingly, the tech list included no US companies.

However five US businesses did raise $83m with a combined market cap of $2bn during October and November.

So the inescapable conclusions are:
• AIM may have slowed, but it sure ain’t stalled
• AIM welcomes US companies
• AIM welcomes tech companies

Which leaves just one, big, fat, multi-billion dollar question hanging unaswered in the air - not what's the price of an average share - but why are US tech companies so uncharacteristically shy of London?