AIM firms hit in subprime chaos

AIM firms hit in subprime chaos

More AIM-listed tech stock firms may look to go private after another week of market turmoil hits valuations

Alternative Investment Market (AIM)-listed resellers have voiced fears their shares have become severely undervalued following another week of stockmarket turmoil.

Last Monday, the UK’s main index plunged by 2.7 per cent, the biggest drop since mid-August when the subprime crisis first came to light.

With AIM’s 149 tech stocks struggling to attract the attention of battle-scarred investors, onlookers are predicting several could follow in the footsteps of managed services outfit InTechnology, by announcing plans to delist.

Ian Smith, chief executive of AIM-listed storage reseller Xploite, said recent independent analysis from Edison Investment Research found its share price is undervalued by 50 per cent.

“There are a load of small tech stocks listed on the AIM and eight out of ten of them are hacked off with where they are,” Smith argued.

“The whole subprime nonsense has had a damaging effect on stocks and many small cap companies are now significantly undervalued.

“We are okay as we have a lot of headroom in debt financing, but if a company decided to raise money in the City right now they would be doing a disservice to their shareholders,” he said.

Scott Fletcher, chief executive at Plus-listed reseller ANS, said: “The credit crunch came and went, but it is back again and it appears to have hit the stock market hard in the past week. It is frustrating when you are running your company well and profits are improving, but your share price is not rising.”

Fletcher said Xploite and managed services outfit Computerland had been particularly badly hit.

John Hughman, senior technology analyst at market watcher Ernst & Young, agreed that small tech stocks are finding it difficult to a ttract the attention of analysts.

“I can see the pressures they face. I would expect resellers that are more focused on good cash flow and annuity business than high revenue and profit growth to look at going private,” he added.

However, the chief executive of one AIM-listed vendor, who wished to remain anonymous, said: “Our share price is definitely undervalued at the moment. But the AIM market really suits us because it allows us to raise funds for acquisitions.”

InTechnology announced last month that it had received irrevocable undertakings in favour of its delisting from shareholders representing 69.2 per cent of its share capital.

The VAR was concerned about the liquidity of its shares, claiming they had continued to underperform in 2007 due to a lack of demand.

Computerland was unavailable for comment.