The stock market can be a daunting proposition for young companies growing fast. The regulatory requirements, accounting practices and constant reporting can be enough to put off even the most ambitious entrepreneur.
And so it was 20 years ago that a junior market was established, a way of providing a stepping stone to a full listing and opening up the institutional investor community to a new type of business.
Nowadays, AIM is home to 1,100 companies (of which about 850 are based in the UK) with a combined market capitalisation of 70bn. To find out how the market has evolved over two decades, and predict where it might end up in another two, we quizzed Marcus Stuttard, head of UK Primary Markets and head of AIM. But before we get on to that, here are the top-line figures showing what AIM has achieved.
- 3,500 admitted since launch raising 920bn ( £40bn at IPO and 52bn through further fundraisings)
- Average market cap grown from 8.2m in 1995 to 70m in 2015
- Average daily value of shares traded increased from 2m in 1995 to 42m
- Since 2008 financial crisis, over 530 companies have joined raising over 7.3bn
- Amount raised at admission in 2014 135 per cent higher than raised at IPO in 2008
- 65 consumer goods companies have aggregate market cap of 5.3bn
- 119 technology companies represent a combined market cap of 10.1bn
- 188 industrial companies have aggregate market of 10.3bn
- Overall economic impact of UK AIM companies equivalent to 25bn and 731,000 jobs
- In first year post admission, those with less than 5m turnover grow by 200 per cent in turnover and more than 100 per cent in employment
- Correlation between the location of AIM companies and areas with high levels of patents granted
Stuttard believes that, even today two decades later, AIM has remained true to its original goals. One of the things weve been clear about is the importance of having a number of different routes to market for companies, and investors in that respect we believe strongly in a differentiated offering,” he explained.
The areas where AIM has definitely evolved would include its broad, global reach. The fact that AIM companies have assets or operations in over 100 countries, and also that there are such a wide range of investors supporting them, shows this.
One part of AIM Stuttard is clearly proud of is the fact that big institutional investors such as Fidelity, Blackrock and Investco have shown clear interest in the small-cap firms found on the junior exchange.
The depth of institutional investment on AIM was shown, he believes, by the billions of pounds that were still raised in the aftermath of the financial crisis.
The future opportunities up for grabs are closely tied to the growing community that AIM has, Stuttard claimed. Conscious that there are a much greater range of companies in the UK and Europe that should be suing equity to fund growth, the London Stock Exchange has introduced a number of initiatives to foster a greater sense of togetherness and show what can come from a listing.
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Its report 1,000 Companies to Inspire Britain” is now an annual celebration of some of the fastest-growing and most dynamic small and medium-sized companies in the UK. Top performing sectors for the last report revenue wise included IT (350 per cent average annual revenue growth between 2010 and 2014), retail (250 per cent), real estate (180 per cent) and advertising/marketing (144 per cent).
Recent years have also seen the introducing of an Elite programme taking 20-25 business a year and giving each earlier access to the investor and advisory community. The LSE has also fostered close ties with earlier forms of fundraising such as EIS, SEIS and VCTs. This, Stuttard said, means the country has a much stronger pipeline of companies that benefit from being public .
“We will see a lot of development over the next 20 years as technological innovation is clearly there. As is policy-makers’ understanding of the need to support high-growth and scaling-up businesses with equity. Its impossible to predict what it will look like, but it all points to a greater need for AIM.