Happy 25th Birthday AIM – but should we be celebrating?
By Adam Lloyd, Partner
AIM (formerly known as the Alternative Investment Market) was launched on 19 June 1995 as a replacement for its predecessor, the Unlisted Securities Market (USM) which itself was launched in 1980. AIM supporter or not, silver (25 years) or ruby (40 years), you take your pick. Either way is it worthy of celebration?
AIM has grown from just 10 companies and a combined market capitalisation of £82 million at launch to 840 companies and a collective valuation of almost £90 billion today.
It’s not been a straight line from those early days. The total number of companies peaked at almost 1700 in the 2006 IPO boom and the total value hit its peak in 2017, nudging toward £110 billion with 960 companies. So, it’s had its ups and downs, like all markets, but despite the impressive growth these numbers don’t tell the full story of AIM’s global success.
Critics have been numerous and vocal over the years. They claim the market is unregulated and high risk while others cite a lack of liquidity and an inability to sell shares once invested. This is a bit like saying you don’t like a dog because it’s got teeth. AIM’s prime function is to provide a stock market for companies that are smaller, less developed and requiring a more flexible regulatory system than the main markets. Risk and a lack of liquidity are a fundamental reality and an unavoidable function of size, or lack of it. Nevertheless, as the market has matured the average daily value of trades has increased steadily year on year to £300 million per day in 2020, the highest daily figures in AIM’s history.
AIM is unique amongst the World’s equity markets because it provides smaller companies from across the globe with access to equity funding that they would otherwise be unable to find. Its longevity speaks to its continuing success as the World’s small cap equity market. Almost 15% of the constituents are overseas companies that come to AIM because they have no access to equity back home. As a source of funding for growth companies, from home and abroad, AIM is unparalleled with over 3800 companies coming to London and raising a total of £117 billion since the launch 25 years ago.
But even these numbers aren’t the whole picture. As home to one of the world’s great equity markets and it should be no surprise that AIM has flourished in London. The UK’s lawyers, accountants, brokers and PR advisors can all draw on decades of expertise in equity markets to advise and support the companies that come to The City. Without this vast support network of world class professional service providers, it would not have been possible for so many companies to raise so much money.
Over the years many companies may have floated and failed but AIM is a great steppingstone for young businesses finding their feet in demanding global markets. Pioneering businesses like ASOS, AB Dynamics, Blue Prism and Ceres Power with new business models and world leading technologies have found the funding and support they need to develop and achieve their ambitions. For all the companies that fell short the AIM success stories are truly world-beating.
Should we be celebrating? Absolutely!