The credit crunch that triggered turbulence throughout global financial markets, destabilising share prices across the board, has hit AIM particularly hard, squeezing the life out of what had been a buoyant IPO pipeline. 

From September 2007 to August 2008, the number of companies on the index fell 3.1 per cent from 1,685 to 1,634. AIM is now the same size as it was at the end of 2006, and if the shrinkage continues it will be the first calendar year of negative growth since its foundation in 1995. 

With investors looking to avoid risk more than ever, valuations have been even harder hit and the market value of AIM has contracted by 23 per cent, from £101.9 billion to £78.1 billion. This is compared to nearly 70 per cent growth reported in the previous four years. 

Although new entrants continued to flow onto AIM, market conditions have undoubtedly dissuaded many prospective entrants from listing, meaning that 137 new ventures – including transfers from other markets but excluding readmissions – joined AIM in the past 12 months. The amount of money new companies were able to attract was also much affected, at just £2.6 billion, compared to the £9.4 billion raised in calendar year 2006 and the £6.2 billion companies received in 2007.  

A conspicuous development is the increasing length of AIM’s tail, as now much more than half of its constituent companies are now valued at below £20 million. There are 970 companies in fact, and within this number 664 are valued at less than £10 million, 438 under £5 million and 188 below £2 million. 

Table 1 charts the best-performing shares of the past 12 months. Heading up the list is Sirius Petroleum, which is still “considering a number of opportunities in the oil and gas sector”, having already surged 516.7 per cent from a fraction of a penny to 1.85p after changing its strategy and its name from Global Gaming Technologies. 

It is now valued at £8.4 million. Even smaller, the £1.3 million-capitalised cash shell run by Northern entrepreneur Shami Ahmed, Legendary Investments, enjoyed a threefold leap in its share price thanks to speculation into the company’s possible movements. It is still assessing potential investments. 

Globe Speciality Metals, a combine of silicon metal, foundry alloys and steelmaking alloy producers brought together under a new AIM-listed umbrella, and Coal of Africa, a South Africa-focused coal miner, are the best placed operating companies, in third and fourth position. Globe’s positive news has included a supply agreement with BP’s solar arm and a partnership with New York Power Authority. Coal of Africa has climbed on improving prospects at its coal mine in Limpopo Province and an off-take deal with steel giant ArcelorMittal. Its shares have risen 218 per cent and the company is valued at over £500 million. 

Next is a pearl among the mire-ridden retail sector, online fashion specialist ASOS, which has soared 208 per cent in the last 52 weeks as its financial performance continues to dazzle, with profits up 176 per cent entirely organically.

In the light of impending recession in the UK, investors have been fleeing ventures perceived as high risk. Small caps have borne the brunt and companies that have performed below expectations have been soundly flogged by the market, leading to some dramatic plunges in value. 

Hedge fund manager Absolute Capital Management leads this group (see Table 2), having lost 99.2 per cent of its value in the last 12 months, most of which was last September, when the resignation of co-chief investment officer Florian Homm inspired many investors to redeem their investment in its funds. The resulting lack of liquidity has forced ACM to close some of its funds. 

Second is former Individual Voluntary Arrangement (IVA) business Debtmatters, now trading without much more success as Loanmakers. Sales fell from £18.1 million to £6.9 million in its last full year, before it ditched its IVA operations to concentrate on what was then a flourishing loanbroking business, which has since suffered from tighter lending conditions arising from the credit crunch. 

Third, down 97.3 per cent, is the still-optimistic MicroEmmisive Displays, producer of miniscule television screens, which has suffered from a slower uptake from its market than they and their investors had anticipated. A recent update mentioned discussions with leading camera manufacturers and that the board may consider selling the company.

This is an edited version of a longer report entitled Spotlight on AIM 2008, which examines the largest and the smallest companies on AIM, the biggest and the best IPOs, the fastest-growing companies by sales and by earnings, companies with the largest and the smallest price-to-sales ratios, as well as the most active advisers at IPO and across the whole index.