views

SPOTLIGHT ON SMALL CAPS

THE greatest bugbear of the year for Aim investors, at least on the face of it, has been the exodus of companies from the junior market as more and more are forced to delist amid the economic turmoil. But as the number of firms on Aim continues to fall back, many small cap experts are keen to stress that the delisting frenzy could bring significant positives for the market.<br /><br />&ldquo;This is actually the first step in strengthening Aim for the future, and it&rsquo;s important to get it into context,&rdquo; says Chilton Taylor, head of capital markets at Baker Tilly. &ldquo;The number of delistings is up on previous years but not enormously so, and it means the &lsquo;problem tail&rsquo; of smaller and more unsuitable companies on Aim has been resolved naturally, rather than having to force companies to leave the market, which can only be a positive thing.&rdquo;<br /><br />The statistics back this up: over half the firms which have delisted since the start of last year were either tiddlers with a market cap of below &pound;3m, or firms which were already suspended. Just three firms with a market cap of over &pound;500m left the market.<br /><br />But though sorting out the weaker firms may prove beneficial to Aim in the long run, experts warn that it is the lack of flotations which is proving a major sticking point for Aim&rsquo;s recovery.<br /><br />&ldquo;The real problem has been the lack of IPOs &ndash; so far this year, there has been no activity there at all,&rdquo; says Taylor. &ldquo;Hopefully we are now nearing the bottom of the current situation, though a real upturn in IPO activity is probably still a year away.&rdquo;