There has been “rampant fundraising activity” on AIM this year, and the junior market has been well and truly open for business during lockdown, according to data compiled by City broker Allenby.
Indeed, since the lows of mid-March, activity levels are at their highest in recent memory, it added.
A total of £2.4bn has been raised in the year to the end of last month, with £675mln given to growth companies in both April and May.
There were 75 raises in those two months, and what stands out is the average discount of the shares issued, which was a comparatively modest 13% markdown on the prior-day closing price.
Investors who backed businesses passing the hat via placings have been rewarded handsomely. The average gain is over 48%.
Avacta Group PLC (LON:AVCT) has soared over 700% to 129p since it tapped the market in April for £2mln and is now valued at £324mln. Earlier this month it approached investors again, this time for £45mln, to rapidly scale up the diagnostic business and to accelerate and expand the drug pipeline.
Other star performers after issuing new equity have been Asiamet Resources Ltd. (LON:ARS), which is up around 300% at 3.3p since its share placing and Xeros Technology, which has shot up 160% to 1.24p.
Understandably, new issues were at a premium with just £200mln taken in by companies listing on AIM for the first time.
M&A activity has also tailed off since lockdown. That said, analysts expect it to pick up again as the financially strong (presumably those that were able to successfully access the market for new cash) pick off those with weaker balance sheets.
Counterintuitively, there has been an increase in liquidity with private investors weighing in en masse to push daily trades to an all-time high of more than 70,000 in May.
“A combination of factors appears to have increased retail appetite for investing in AIM over the past few years,” Allenby said.
“Consistently low global interest rates have maintained interest amongst retail investors for equity investments.
“Additionally, tax breaks such as the enterprise investment scheme and inheritance tax qualification combined with increasing levels allowed to be invested in tax free-ISA wrappers will likely have spurred interest in the junior equity market,” the broker added.
The junior market, which celebrates its 25th birthday on Friday, was up 3% over the last five full trading days, which meant it outperformed the FTSE 100, which advanced 2.3% in that time.
It has been a stellar week for one of AIM’s larger constituents, the fashion retailer Boohoo Group PLC (LON:BOO), which advanced more than 15% to 412p.
On Wednesday it issued a stellar trading statement that revealed the resilience of its online model with a 45% rise in full-year sales.
Confirming the thesis that the financially strong will probably end up taking out the weak, Boohoo said it was acquiring the online businesses of Oasis and Warehouse for £5.25mln.
It also owns PLT and Nasty Gal and earlier this year bought struggling brands MissPap, Karen Millen and Coast.
Surprisingly, Clinigen PLC’s (LON:CLIN) share price failed to react to reports that the drugmaker and distributor was in the cross-hairs of Advent Capital, the venture capitalist that bought the defence firm Cobham, which is apparently mulling a £1.5bn bid.
The management of TomCo, the oil sands specialist, have endured a bruising week. The shares were suspended on Wednesday and a £1.5mln City fundraiser was subsequently cancelled.
However, investors seemed unperturbed as the stock quickly doubled on value after relisting to 0.84p. Indeed, a joint venture deal it had with a company called Valkor has been rejigged to mitigate TomCo’s financial contribution until it can raise the funds required.
Another big riser on Friday was Tiziana Life Sciences PLC (LON:TILS), up 13% at 102p, after news it has secured a patent around the oral formulation of a monoclonal antibody that could be used to treat Alzheimer’s and Crohn’s. This method of delivery avoids having to use needles and intravenous lines, which are painful, and it is thought many of the toxic side-effects will be removed.
“Being able to deliver monoclonal antibodies orally for the first time is a game-changer,” said Tiziana’s chairman Gabriele Cerrone. Most monoclonal antibody drugs such as AbbVie’s Humira, the world’s top-selling treatment, are administered intravenously, he added.