AIM IPO winners and losers in 2021

It's been a cracking year so far in terms of the number of new companies floating on AIM, but what about performance?

There have been nearly as many AIM new admissions during 2021 as there were in the whole of 2020. There have been 30 so far, compared with 32 last year, although there were only 10 new admissions in the first half of 2020. 

Victorian Plumbing and healthcare artificial intelligence (AI) company Spectral MD are set to join AIM in the next week, while high street retail software supplier itim and North Sea-focused oil and gas company Orcadian Energy should follow – probably next month.  

The flow of prospective AIM new admissions continues with digital marketing services provider Silver Bullet Data Services and Future Biogas this week announcing plans to join AIM in July. Future Biogas develops and operates anaerobic digestion plants creating clean biogas. It has previously sold on projects to investors such as JLEN Environmental (LSE:JLEN), but management wants to build up its own portfolio of assets. Future Biogas wants to raise £35 million and there is a PrimaryBid offer in progress, which will end on 21 June. 

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Open Orphan (LSE:ORPH) spin-off Poolbeg Pharma is also on its way to AIM, and the influenza treatment developer will also be raising cash via PrimaryBid. Shareholders on the Open Orphan register on 17 June will be issued one Poolberg share for every 2.98 Open Orphan shares they own. These shares will initially be held by Croft Nominees, and investors will not be allowed to deal in them until nine months after AIM admission. 

Nearly £370 million has been raised by new AIM companies this year, which is below the £486.6 million raised during 2020. Given the companies on the blocks, last year’s total – and the £489 million raised in 2019 - should be beaten in the next year or so. It may still be difficult to get back to the times when more than £1 billion is raised in a year, though. 

Top IPO performers: the stock that’s trebled

Stripping out the seven reversals/readmissions and three moves from the Main Market, there have been 20 completely new companies joining AIM during 2021. Last year, there were three new companies in the first half and all those joined the junior market in the first quarter. 

Fifteen of the 20 companies are trading at above their flotation price, with three that have more than doubled – 4basebio UK Societas (LSE:4BB), bars operator Nightcap (LSE:NGHT) and Cornish Metals Inc (LSE:CUSN), which is also listed on the TSX-Venture Exchange and is resurrecting the South Crofty tin mining in Cornwall. 

DNA products manufacturer 4basebio UK Societas is the best performer with a share price that has more than trebled, although the admission price was set as an introduction price after the company was spun-out of a German business. The opening price was 147.5p and it ended the first day of trading at 337.5p, suggesting the introduction price was too conservative. 4basebio UK Societas is one of the smallest companies to float this year and liquidity is limited. 

The average increase of the 20 companies is 36.3%, although most of the larger increases were for companies that floated earlier in the first quarter. It is good to see that there are a wide range of sectors included in these companies. Healthcare dominates, but there are software, mining, financials, retail, battery technology and consumer companies. 

The standout performer in the second quarter is Trellus Health (LSE:TRLS), which is a spin-out from EKF Diagnostics (LSE:EKF). Previous EKF spin-off kidney disease diagnosis and monitoring technology developer Renalytix AI (LSE:RENX) and its own subsequent kidney diagnostics spin-off Verici Dx (LSE:VRCI) both did well after flotation and are trading at multiples of their issue prices. 

Trellus is developing personalised care for people with chronic conditions with the initial focus being inflammatory bowel disease (IBD). The service offered is what the company calls resilience-driven connected health, which is about digital care delivery and patient monitoring.

There is no cure for IBD, but Trellus Health can help to reduce the related problems. The total financial burden of IBD in the US is up to $50 billion a year, including work missed due to illness. There are three million adult patients. There are initial demonstration projects in the New York area and, if successful, it could be rolled out across the US. 

AIM new admissions in 2021

The losers

Most of the declines in share prices have been relatively modest. Asset manager Team (LSE:TEAM) made a failed bid approach to Tavistock Investments (LSE:TAVI) and the share price has been drifting lower since then. 

Cornerstone FS (LSE:CSFS) is the biggest faller, and it appears to provide a cautionary tale concerning reversing into a shell that previously owned a company in a completely different sector. It was originally a shaving products company that raised £876,000 from 229 investors via Crowdcube. That business was sold, and the international payments operations reversed into the shell. There were some small trades on the first day of trading, including one valued at £9, as past investors took the chance to exit and this does not help the share price. 

Cornerstone FS has a ‘buy and build’ strategy in the international payments sector. Some of the flotation proceeds will be spent on further development of the cloud-based technology platform. However, the company needs to build up its scale via acquisitions and the fall in the share price does not help. 

Some of the higher profile flotations have not performed as well. The Parsley Box and consumer equipment and CDs recycler musicMagpie (LSE:MMAG) share prices have both fallen back. This reflects their full valuations, and this seems to be increasingly true of many recent flotations. 

Scotland-based Parsley Box (LSE:MEAL) supplies single portion meals, that can be stored in a cupboard and do not have to be put in a fridge or freezer. The Covid-19 lockdown probably accelerated customer growth by around a year. A low-cost model, with most aspects of the business outsourced, reduces the overheads of the business but it remains loss-making. 

However, analysts at broker finnCap believes that Parsley Box could make a pre-tax profit of £3.5 million in 2022, which would mean that the shares are trading on 30 times prospective 2022 earnings. The profit is expected to more than double the following year. That is some way off and more evidence of progress towards these targets is required before the share price will recover. Non-executive chairman Chris van der Kuyl has been buying shares since trading started at prices between 181p and 203p. He has invested around £160,000.

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musicMagpie is trading on 30 times prospective 2020-21 earnings, but this multiple should reduce sharply over the next two years. Recycling of mobile phones and computers is likely to grow with the move to 5G expected to increase supply of older phones as people switch to the new technology. 

The company is trying new initiatives. For example, a smartphone rental business was set up last October. This subscription offer enables consumers to obtain a pre-used smartphone through regular monthly payments rather than a one-off payment. This generates more income per phone for the company. There were 4,400 rentals at the end of March, and this increased to more than 7,500 at the end of May. This rental service will be launched in the US in 2022. If this momentum continues then, combined with other new initiatives, the earnings multiple could fall more quickly than expected.  

Mixed start for this trio

There has been a mixed performance by the three companies that raised a portion of their new funds via PrimaryBid – Nightcap, Parsley Box and Artisanal Spirits (LSE:ART). Nightcap is the standout, with a 130% increase and at one stage there was an increase of more than 250%. Investors needed to be brave to invest in a bar operator at the beginning of 2021. They were backing the experienced management team and the deals they could secure. 

The Artisanal Spirits Company owns the Scotch Malt Whisky Society (SWMS) and the placing/offer price was at the bottom of the 112p a share to 121p a share price range. So, the current price is back at the top of the range – the shares were previously trading at a discount. 

The reason for the improvement is the news that the US 25% tariff on Scotch whisky has been suspended for five years. The company has been absorbing the additional cost of the tariff rather than increasing prices, so this should boost profitability. The US is a fast-growing market for whisky and there are already plans to launch The American Whiskey Society.