Flow of new issues is drying up

TOM STEVENSON

City Editor

The new issues market continued to stagnate in the first quarter of the year despite the stock market being relatively stable and within a whisker of its all time high - usually ideal conditions for flotations.

In the first three months of 1996 only 16 companies achieved full listings, down from 22 in the first quarter of 1995, itself a disappointing year.

According to Neil Austin, new issues specialist in the corporate finance department of KPMG, the accountancy and consulting firm, one factor has been the unexpected success of the Alternative Investment Market. The relative ease and cheapness of gaining an AIM listing, he believes, has sidetracked many companies that might otherwise have gone for the full market.

"AIM is clearly the appropriate market for smaller companies as it has a lighter regulatory touch and is easier to join," Mr Austin said. "Owners of companies are also casting an eye at the possibility of a change of government and possibly consequent higher tax rates. This provides a spur to sell and the ready availability of purchasers with cash means a sale may yield as good a value as a flotation."

The cash value of main-market flotations between January and March was about pounds 1bn, which compared favourably with last year's full year total of pounds 2.6bn.

More than two thirds of that, however, was accounted for by investment trust flotations, which raised pounds 709m in the quarter.

The most high-profile flotation of the period, the Orange mobile phone issue, which raised pounds 624m, was not included in KPMG's figures because dealings in the shares remain conditional until 2 April.