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Capital markets embracing uncertain times

Paul Blythe - Head of Capital Markets, Crowe UK
03 June 2019

Since the last issue of these rankings, AIM has seen six new issues join the market, raising aggregate new funds of £79.6 million. During the same period, the Main Market saw 14 new issues raising aggregate new funds of £594 million. This is encouraging news following the slow start to 2019 and points to the fact that capital markets remain open albeit with very low activity levels when compared to historical run rates. From the perspective of the number of issuers, the quarter saw 15 cancellations on AIM leading to a net nine companies leaving that market. The Main Market, by contrast, was able to add two companies to its ranks during the period following 12 cancellations. These figures leave AIM with 904 issuers with an aggregate market capitalisation of £104.1 billion and the Main Market with 1,157 and an aggregate market capitalisation of £3.9 trillion. Despite AIM losing a net nine companies during the period, it should be noted that the aggregate market capitalisation of its issuers was at its second highest value since 2017 and that it had 16 companies with a market capitalisation of over £1 billion. Top of the tree was Fevertree at £3.65 billion. 

Back in February 2019, I wrote to you in times of uncertainty about Brexit, the US-China trade war and the rise of the medicinal cannabis market in the UK. Since then, both the Brexit issue and the Washington-Beijing stand-off remain firmly in place, leading to continued malaise in London’s equity capital markets. The Brexit question remains on the table until at least October but the mood of the nation will soon be tested in the upcoming European elections later in May. Early opinion polls suggest that the government are facing heavy losses and that the newly-formed Brexit Party are coming up on the rails. Whatever the outcome of the European elections, the big question as to ‘how’, ‘when’ and even ‘if’ we are to leave the EU remains open. All of this means that we are heading into another period of uncertainty which will likely result in a difficult time for new issues on our capital markets. Not surprisingly, institutional investors are sitting tight and waiting for the political landscape to unveil itself before making their investment decisions.

With regards to the US-China stand-off on trade tariff s, diplomatic discussions and attempts to reach the middle ground face an uphill struggle in light of escalating tension between Washington and Beijing. The good news for us closer to home is that Washington has deferred the impending import tariff s on EU and Japanese cars and auto parts by up to six months. This would suggest that Washington is focussing efforts on resolving its trade dispute with Beijing before opening up a second front with the EU and Japan. Of course, this may suggest that the EU is merely in a holding pattern for the time being with car manufacturers and related support services on standby for harder times ahead. 

On a more positive note, the general appetite in London for medicinal cannabis-related businesses remains on the upward curve. We have the first staging in London of European Cannabis Week between 23 and 29 June 2019, where anyone active in the sector, or looking to engage with it, are coming together to forge working and investor relationships for the year ahead. I will be attending and will hopefully see you there.

Paul Blythe
Head of Capital Markets
Crowe UK

T: +44 (0)20 7842 7231