AIM, a capital success story

“Over the past quarter of a century AIM has established itself as a core part of the funding ecosystem in the UK,” declared Philip Secrett, the head of Public Company Advisory at Grant Thornton UK.

When determining whether AIM, now 25 years old, has been a success it is useful to remember why stock markets exist.

There are two sides to the equation. From the perspective of companies, the purpose of stock markets is to give them access to capital and on this score, the weight of evidence suggests the market has been a success.

From the perspective of investors, the purpose of the market is for them to invest their capital to accrue a positive return on their investment, hopefully above the rate they would have got leaving it in the building society or overnight money markets.

On this score, the inclination is to determine a “not proven” verdict. We’ll take a look in a separate article whether AIM has been a happy hunting ground for investors but in this feature, we’ll look at how well the market has served the companies that have listed on it.

A Capital Success

According to the London Stock Exchange (LSE), AIM is “the world’s most successful growth market”.

The LSE owns AIM so it is not exactly a disinterested observer but it has some impressive statistics to back up its claim.

Since 1995, more than 3,865 companies have raised around £118bn in fresh capital on AIM.

In its first five years of existence, the average amount of money raised was £2.8mln; over the last five years that has risen to £21.4mln, which would barely cover the pension contributions of a boss of a FTSE 100 company but is enough to keep the lights on at many a growth company for a few years.

According to Richard Power, the head of Quoted Smaller Companies at Octopus Investments, London’s junior market is now seen as “the go-to index for ambitious growth companies”.

“This has helped to create household names and international businesses like FeverTree, Abcam and Asos, that make enormous contributions to the economy through job creation and the sectors they support. It really is a tremendous UK success story,” Power enthused.

Nicholas Hyett, an equity analyst at Hargreaves Lansdown, is a bit more nuanced in his assessment of the company’s track record.

“The Alternative Investment Market, or AIM, was designed to help smaller companies access funding. Smaller companies are inherently higher risk, and the corporate governance requirements for companies listed on AIM are also lighter, so it should come as no surprise that there have been a fair few failures on the market over the years. On the other hand, there have also been some notable successes, and while many companies choose to move onto the London Stock Exchange as they get larger, AIM is no longer the preserve of small companies alone,” Hyett said.

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