Trends in Delistings: Most delistings on AIM are at the company’s request

This News Analysis considers 171 delisted companies from AIM of the London Stock Exchange (LSE) and highlights the trends found in the periods 2016/7 and 2017/8.

Corporate analysis: Market Tracker reviewed 71 delistings from AIM between 1 February 2017 and 31 January 2018 (2017/8 Period). This analysis examines the reasons cited by these companies for delisting, making comparisons with the 100 companies which delisted from AIM in the period between 1 February 2016 and 31 January 2017 (2016/7 Period). The statistics used in this analysis are based on the AIM statistics from the LSE website.

2017/8 Period Trends


In the 2017/8 Period, 71 companies cancelled their shares on AIM. This confirms a decrease of 29% from the 2016/7 Period, compared to the 100 delistings in the 2016/7 Period. The higher number of delistings in the 2016/7 Period may be explained by the uncertainty surrounding the political and economic climate created by the EU referendum in June 2016. This uncertainty may have lessened in the 2017/8 period, which is indicated by a fall in the number of delistings. Of the 71 companies reviewed during the 2017/8 Period, reasons for delisting were:

  • At the company’s request (22/71 companies—31%)
  • As a result of an Acquisition (Merger/MBO/Private/PLC Acquisition/ Takeover/Scheme) (19/71 companies—27%)
  • Pursuant to AIM Rule 41 where the company’s shares have been suspended for more than six months (16/71 companies—22%)
  • Pursuant to AIM Rule 1 where the company has failed to appoint a nominated adviser (14/71 companies—20%)

Costs were a factor in over two thirds of companies’ requests

‘The considerable cost, management time and the legal and regulatory burden associated with maintaining the Company’s admission to trading on AIM which, in the directors’ opinion, are disproportionate to the benefits to the Company’ Turbo Power Systems Inc.—19 April 2017

Of the 22 companies which delisted from AIM at the request of the company, over two thirds (68%) cited the costs of maintaining a listing as the primary reason for delisting in their announcements or delisting circulars (although two companies did not expand on their reasoning). In addition to the costs of maintaining a listing, the legal and regulatory burden of a listing was a factor for 8 companies (53% of companies citing costs) on AIM. Low share liquidity in addition to costs featured for 9 companies (60% of companies citing costs). Insufficient trading in the market and lack of investors were other reasons companies gave for opting to leave AIM. One company, Fusionex International plc, cited the costs of maintaining a listing as disproportionate because of a disappointing valuation on the market. The company then attributed political uncertainty as a contributing factor which was a rarity for the delisting announcements and circulars in the 2017/8 period.

‘The Directors believe the reasons…specifically include a lack of liquidity, and in part, a lack of in-depth independent research into the Company. It is not possible to attribute this to one single factor however the Directors believe that the current political uncertainty in Europe is unhelpful, which makes the public markets in the United Kingdom less attractive for Fusionex than at the time of the IPO.’  Fusionex International plc— 26 May 2017

Impact of the removal of the Nominated Adviser
Another reason for delisting, cited by 20% of companies, was pursuant to AIM Rule 1 and the failure to appoint a Nominated Adviser (Nomad).

‘If an AIM company ceases to have a Nominated Adviser the Exchange will suspend trading in its AIM securities. If within one month of that suspension the AIM company has failed to appoint a replacement Nominated Adviser, the admission of its AIM securities will be cancelled.’ AIM Rule 1

On Wednesday 11 October 2017, it was announced that ZAI Corporate Finance Ltd’s Nomad status was to be removed after it failed to meet eligibility criteria under AIM rules. This gave the companies to whom ZAI was a Nomad until 19 October 2017 to appoint a new Nomad. The companies which failed to do so had their shares suspended until a new Nomad was appointed. Consequently, these suspended companies had until 20 November 2017 to appoint a new Nomad or have their shares cancelled from trading.

Of the 11 companies that confirmed that they were affected, three companies (Grand Group Investment plc, Northwest Investment Group Limited and Alpha Returns Group plc), failed to meet this deadline and subsequently announced the cancellation of their shares on AIM.

2016/7 Period Trends

In the 2016/7 Period, 100 companies cancelled their shares on AIM. The reasons for delisting were:

  • At the company’s request (59/100 companies—59%)
  • As a result of an Acquisition (Merger/MBO/Private/PLC Acquisition/ Takeover/Scheme) (1/100 companies—1%)
  • Pursuant to AIM Rule 41 where the company’s shares have been suspended for more than six months (22/100 companies—22%)
  • Pursuant to AIM Rule 1 where the company has failed to appoint a nominated adviser (18/100 companies—18%)

In comparison to the 2017/8 Period, the proportions are less evenly spread, especially regarding companies that cited reasons relating to an acquisition or cancellations made at the company’s request.

Costs were more frequently cited as the sole reason for delisting
Our research indicates that only 27 out of 59 companies which delisted at the company’s request expanded on their reasoning in the 2016/7 Period. Of these 27 companies, costs were again the primary reason for delisting with 17 companies (63%) citing costs as a reason. This equates to 29% of all the companies that delisted at the request of the company.

Seven of the 17 companies citing costs (41%) also mentioned the legal and regulatory burden of maintaining a listing as a factor in their delisting announcement (compared to 53% in the 2017/8 Period). Low share liquidity in addition to costs also featured for six companies (35% of companies citing costs compared to 60% in the 2017/8 period). The results indicate that companies in the 2017/8 period gave information as to multiple factors that contributed to the cancellation of shares, in contrast with the 2016/7 Period where 59% of companies cited costs solely as a reason for cancellation (only 9% of companies did this in the 2017/8 Period).

‘The Company expects that continuation of the decline in proportion of shares held and traded through AIM is likely to lead to a decrease in the liquidity of AIM trading and that it would be advantageous for all GW shareholders to combine trading volumes from both markets onto a single exchange in one time zone.’ GW Pharmaceuticals plc— 19 October 2016

Liquidation
Cancellations at the company’s request also saw three companies in the 2016/7 that were forced to delist as a result of the company going into liquidation. This shows a similar figure compared with the 2017/8 Period for companies delisting for this reason with 11% of companies that expanded on their reasoning in 2016/7 and 10% in 2017/8.

Industry sector trends
The most common industry sectors for delisting companies in the 2017/8 Period were:

  • Oil & gas (14% of companies),
  • Professional services (10%),
  • Mining, metals & extraction (9%) and
  • Investment (9%).

With comparison to the 2016/7 Period:

  • Mining, metals & extraction (21%),
  • Investment (13%),
  • Computing & IT (10%) and
  • Financial services/ Pharmaceuticals & biotechnology (8%).

Both the industry sectors Mining, metals & extraction and the Investment sector featured in the top four for both periods. While this may indicate that companies from these sectors are more likely to cancel their shares on AIM, it may also reflect that a large proportion of AIM constituents are made up of companies in this sector.

In the Investment sector, the most common reason for delisting was at the request of the company (60% of companies in this sector). More specifically, 35% of the companies in this sector delisting over the two periods cited the costs of maintaining a listing on AIM as part of their reason. When looking at the Mining, metals & extraction industry sector over the two periods, the most common reason for delisting was pursuant to AIM rule 41 (46% of companies) with only 15% of companies citing costs as a main reason for delisting. This may hint to a more disappointing performance generally in the Investment sector over the two periods, resulting in companies perceiving the costs of maintaining a listing to be too high.

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