AIM shares: how the 2021 IPOs have fared so far

Our award-winning AIM writer reflects on a bumper year for new admissions to the junior market, and names the winners and losers in performance terms.

Last year was one of the busiest for AIM new admissions for nearly a decade. However, even though there were more companies joining AIM and more was raised by them then since 2014, it was not generally good for the investors in most of these companies.

Most of the share prices have fallen. The figures include the new companies that joined AIM and not the reverse takeovers and readmissions, or the five companies that moved from the Main Market to AIM. That means that there are 72 companies included in the analysis and 52 of these are below their issue prices. Many of these companies went to a premium in initial dealings.

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There were 19 companies where share prices have at least halved since flotation, compared with 20 where share prices have risen. There are some companies that have done particularly well. Four have at least doubled. The best performer is 4basebio (LSE:4BB), which was spun out of another company and liquidity is limited. That seems part of the reason why it has risen by 436%. Coal miner Bens Creek (LSE:BEN) has more than halved from its peak, but it is still 275% ahead.

Some of the better performers are resources companies, including oil and gas and mining. However, there is quite a mix of companies with gains, such as food wholesaler Kitwave (LSE:KITW) and software training provider Northcoders (LSE:CODE), which have both published positive trading updates. Both dipped below their placing prices during last year.

There was a spate of clean-tech and renewables companies floating last year, and their performance has been mixed. Hydrogen production projects developer Atome Energy (LSE:ATOM) and electric motor technology developer Saietta Group (LSE:SED) are higher, but battery technology developer Amte Power (LSE:AMTE), even though it has made some positive announcements about its new facility and partners, and energy storage developer Gelion (LSE:GELN)have slumped in value.

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AIM has fallen by 24% so far in 2022, and there are 45 of last year’s AIM admissions that have fallen by more than the junior market this year. There are 11 companies where share prices have risen during 2022 and three of those are still below their flotation prices.

Investors need to be choosy

Investors are keen to gain access to new companies joining the London markets. Six of these AIM companies that joined AIM in 2021 offered small investors the chance to be involved in their flotations, but the outcomes have not been that good to say the least. This shows that investors need to be choosy.

The worst-performing new admission from last year is delivered meals provider Parsley Box (LSE:MEAL), which offered shares via PrimaryBid and the share price has dived by 95.1%. This is an example of a high-profile business attracting investors at a premium valuation and failing to live up to optimistic expectations. It is not the only one, though. Technology investor Forward Partners (LSE:FWD) has fallen 54.5% and biotech Poolbeg Pharma (LSE:POLB), which was spun out of Open Orphan (LSE:ORPH), is 53% lower. Laboratories and pharma offices investor Life Science REIT (LSE:LABS), a more solid investment, has drifted lower by 5.9%.

In contrast, bars operator Nightcap (LSE:NGHT) is 45% higher. It floated at the beginning of 2021 when investors were required to be brave to be putting their money into bars and restaurants when lockdowns where still in force. The flip side was the potential to secure sites at attractive rents. Acquisitions have helped to enhance the business, although the share price is well below its high.

The previously mentioned ATOME Energy, which was spun out of President Energy (LSE:PPC), has risen by 17.5% although the share price has been highly volatile.

Some companies joined AIM when their markets were peaking. None more so than broker Peel Hunt (LSE:PEEL). It floated last autumn after a bumper period of fundraisings and other deals and did warn that it would not achieve the same levels of revenues and profit, but it turned out worse than expected due to delayed deals. Even so, the flotation was well timed for the directors who were big sellers at the time.

There are attributes shared by some of the underperforming companies.

Online growth slows

Many companies benefited from growth in online sales due to Covid lockdowns. This has accelerated their growth and they joined AIM when bumper results had been published.

Virgin Wines (LSE:VINO) is an example, and it reported a 6% dip in full-year revenues, although it increased its share of the online wine market from 6.1% to 8.4%. Revenues are still well ahead of levels in 2018-19, suggesting that Covid-related gains are being partially retained.

Electronics and media recycler MusicMagpie (LSE:MMAG) did well with books and media during lockdown, but these higher margin revenues are returning to pre-Covid levels, which more than offsets the growth in the technology recycling business.

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Online women’s fashion retailer In The Style Group (LSE:ITS) fell into loss last year even though revenues were higher. Guidance for this year has been downgraded by 15%, which means revenues are likely to be flat and the loss increased.

Video games companies did well during lockdowns. However, US-based video games developer Devolver Digital Inc (LSE:DEVO) has not traded as well in recent months. Sales of new releases, such as Shadow Warrior 3, have been lower than anticipated and remote working has apparently hampered the coordination of development and the quality of games. Fellow US-based developer and publisher TinyBuild (LSE:TBLD) has fallen 29.9%, yet it has a broader spread of games in its catalogue, and it is still trading strongly so this seems harsh.

The top 20 IPO performers

Prices at 8 August 2022.

Consumer demand

Weaker consumer demand and de-stocking has hit some consumer-focused companies. Supreme (LSE:SUP) was hit by a sharp drop in lighting sales even though its core vaping business continues to grow.

Cosmetics supplier Revolution Beauty Group (LSE:REVB) has delayed its 2021-22 results and cut its expectations for 2022-23. Poor retail demand in the US and the loss of £9 million of Russian and Ukraine revenues have hit the early part of the new financial year. Online demand is switching to store sales and cost increases have hit profitability. However, there have also been issues raised by auditors.

DIY boom aftermath

Victorian Plumbing (LSE:VIC) and CMO Group (LSE:CMO) are examples of companies where demand had soared on the back of increased DIY spending during Covid lockdowns. Demand has eased off in the past year and costs have soared. Interim revenues were lower at Victorian Plumbing, while gross margin fell from 44% to 39% as the focus was on increasing market share rather than pushing through price rises to cover higher costs.

Online building products retailer CMO is still growing but not as fast as expected and guidance is that full-year revenues will increase from £76.3 million to at least £86 million, but previously £95.5 million was forecast.

The bottom 20 IPO performers

Prices at 8 August 2022.

Technology out of favour

Nasdaq and AIM are two of the poorer-performing global markets and this is partly down to the technology companies on these markets. Technology and biotech companies with no real earnings to underpin their valuations were popular with investors two years ago, but those lack of fundamentals are now seen as negative. Investors have lost their patience for potential that is still years away.

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In a future article, I will assess the new AIM admissions from last year and pick out those that provide recovery potential and the ones where share prices could even continue to rise.  

Andrew Hore is a freelance contributor and not a direct employee of interactive investor.