Insights

Capital Quarter Spring 2020: Market view

Time to adapt and stand out

The optimistic outlook that emerged following the General election has long-since vanished. Nobody could have foreseen the shock effect a virus would have on business, borders and daily life – and the markets continue to struggle with the uncertainty about the length and severity of the disruption that COVID-19 is causing.

AIM

The market for the first quarter of 2020 can only be described as turbulent. The decrease in the market capital of AIM of approximately £30 billion in the three months to the end of March 2020 highlights the ongoing effect of COVID-19.

In 2019, for the second year running, AIM recorded a reduction in the number of new issues (2018: 65 vs 2019:23) and money raised as a result (2018: £1.6billion vs 2019: £489million).
The trend of companies delisting from AIM continued for the 12th year running, with the exception of 2014. A total of 831 businesses have now cancelled their placement since 2008.

Main Market

The fall in the Main Market value since the start of the year has been driven by the largest constituents, with 98% (£876m) of the reduction in value coming from the top 200 companies on the exchange. Many of the ‘Small cap’ companies, although affected, have not seen their share prices affected to the same extent.

The Main Market also saw a reduction in the number of companies on the exchange in 2019 (2018: 1,166 vs 2019: 1,143) and money raised (2018: £19.4 billion vs 2019: £16.8 billion).

How should you respond?

Despite the efforts of governments and central banks around the world to stabilise the situation, we are likely to see further market uncertainty over the coming months. Listed firms are having to adapt, with the most successful sharing some common traits:
  • Effective communication with clients, stakeholders and staff members
  • Enabling employees to work flexibly to limit disruption to their day to day schedules
  • Proactive crisis planning which is regularly reviewed and revised to consider ongoing changes
  • Consistent and prudent liquidity monitoring to ensure the best service for clients while making acute business decisions in line with government support
  • Providing effective and sensitive information in response to the evolving crisis
In these challenging times, there is an opportunity for companies to stand out. The actions that management teams take now can be the difference between adding real value or damaging long term reputation – so it’s important to consider big decisions carefully.

Written by Joseph Baulf in our London office.