AIM, the junior market of the London Stock Exchange (LSE), has just celebrated its 20th anniversary. Over the course of the past two decades, AIM has admitted in excess of 3,500 companies and raised more than £90bn.
The majority of companies currently listed on AIM are UK based, but the successful growth market boasts a healthy and increasing array of internationally based constituents.
Whilst some critics have argued that the junior market has been more miss than hit, head of AIM Marcus Stuttard disagrees. He argues that AIM provides small to mid-cap companies the best opportunity to access capital for growth without the level of red-tape or document production required for companies on the Main Market. “The overall structure of disclosures and transparency is broadly the same as the Main Market but we’re less prescriptive,” he said. Based on these principles, AIM has built a reputation over the last 20 years of being one of the world’s leading growth markets.
When AIM was first established in 1995 it was perceived as a highly speculative market. In spite of this, the opportunity to access capital for growth lured a large number of companies to list. Numbers on AIM peaked in 2007 amid the dot.com boom with an estimated market value of £97.69bn and 1,694 companies listed. Following the global financial crisis in 2008, recovery has been slow and combined market value has yet to reach pre 2008 figures.
However, there are now nearly 1,100 companies listed on AIM, covering 40 different sectors valued at a combined total of approximately £75bn. This clearly shows that AIM still has the resources to attract a large number of companies, some of which have been very successful. Famous AIM success stories include Domino’s Pizza, Majestic Wine and online fashion retailer ASOS.
A number of recent changes to AIM have made the market more accessible to investors. From August 2013, individuals have been able to use their Individual Savings Accounts (ISAs) to invest in shares and stock in AIM companies. As of April 2014, Stamp Duty and Stamp Duty Reserve Tax is no longer chargeable on transactions in securities admitted to trading on AIM. These (and other) tax incentives and relaxed regulatory policy mean that AIM remains an attractive market for both companies and investors.
Read more about AIM’s 20th birthday:
If a company wishes to float on AIM, it may seek to do so by way of an “introduction” to the market or as part of an equity fundraising referred to as an initial public offering (IPO). The company must retain a nominated adviser (nomad) and broker at all times. More often than not, a nomad might also act as the broker. The nomad plays a particularly important role as it reports on the company’s suitability for listing to the LSE. This includes a high level of due diligence being undertaken by the nomad on the business and its directors which can often take around six months. A nomad will also require a significant level of due diligence to be undertaken by reporting accountants and lawyers to the company.
One of the key benefits of listing on AIM, as opposed to the Main Market, is that provided any offer of shares is structured so as not to constitute a public offer of €5m or more, a costly (and lengthy) formal prospectus does not need to be produced for Financial Conduct Authority (FCA) approval. An admission document does need to be submitted but this is less onerous in comparison to a prospectus.
Statistics published by chartered accountants, UHY Hacker Young, state that the cost of listing on AIM has fallen over the last year partly due to the increasing number of large value IPOs. However, the costs associated with listing are by no means negligible and the ongoing costs of maintaining a listing on a public market need to be carefully considered.
Over the past 20 years AIM has seen a number of huge winners and many losers. However, despite the peaks and troughs seen by investors and companies alike, it is clear that AIM is still a robust market proven to provide key opportunities for UK and overseas companies seeking to raise capital for growth.
James Lyons is a partner in the corporate team at Ashfords.
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