The AIM Stock Market, or ‘The Alternative Investment Market’, is a Stock Market owned and operated by The London Stock Exchange. The market was established in 1995 as a global Stock Market for smaller growing companies. In the early days of AIM the market was, rather unfairly, considered by some stock market commentators to be simply a stepping stone for companies to join The London Stock Exchange’s larger Main Market.
In recent years, however, the profile and credibility of The AIM Stock Market has grown globally, and now AIM is considered a highly successful growth stock market in its own right. Indeed, AIM now boasts the title of ‘the most successful growth company stock market in the world’.
Because AIM Stock Market companies are not bound by the UK Listing Rules, admission and on-going costs of joining the market tend to be less expensive than those associated with floating on The London Stock Exchange’s Main Market.
Since its launch over 3000 companies have joined AIM, representing a broad range of sizes of companies, from start-up companies to larger companies valued in excess of £500m. Companies whose shares are floated on The AIM Stock Market also represent many business sectors, ranging from mining, entertainment, retail and support services to software and biotechnology.
The benefits of The AIM Stock Market
- Initial Fundraising – The raising of finance can be undertaken by a company at the time of the initial flotation on the AIM Stock Market. As soon as the flotation is completed, funds are transferred to the company’s bank account.
- Further fundraisings – An admission to AIM also provides companies with access to long-term investment capital to fuel the further growth of a business. Many companies on The AIM Stock Market take full advantage of this by undertaking multiple fundraisings over a period of time.
- Increasing the value of the company – Companies floating on The AIM Stock Market are generally valued higher than they would be if they remained in private hands. This means for existing shareholders in the business an enhanced value of their shareholding.
- A potential exit route for existing Shareholders – The AIM Stock Market provides companies with the opportunity to increase their shareholder base, and in so doing provides existing shareholders in the company with a potential exit or part exit route if required either at the time of the flotation or at a later time of their choosing. The important point here is that it is for the existing shareholders to decide which is the most appropriate option for their particular set of circumstances.
- Heightened profile and credibility – Flotation on The AIM Stock market creates a higher public profile for companies with the opportunity to use the AIM flotation to promote the company, and improve brand awareness. A flotation on The AIM Stock Market may in addition, improve a company’s credibility and standing, providing some reassurance to customers, suppliers, and even banks and insurers.
- Less onerous rules for companies – The AIM Stock Market was designed with smaller growing companies in mind, and therefore the rules relating to companies listed on the market are more flexible than those for The London Stock Exchange’s Main Market.
- No minimum size of company – The Aim Stock Market rules does not stipulate the minimum size of company that can join the market.
- No minimum trading record – There is no minimum trading record required for companies prior to joining the market.
- Tax benefits – The AIM Stock Market is unquoted for the purposes of tax, meaning that AIM Investors Company may benefit from tax relief.
The drawbacks of The AIM Stock Market
- Time – Both the entry requirements and on-going obligations for AIM companies are considerably less onerous than for The London Stock Exchange’s Main Market. Nevertheless floating a company on The AIM Stock Market can be time consuming for senior management and careful planning is required to prevent the process impacting on the day to day running of the business.
- Cost – The costs involved will vary depending upon the size of the fundraising. Many of the costs associated with the flotation may be back end loaded, payable only on a successful flotation, and the majority of the costs paid out of the funds raised once floated on the market.
Who invests in AIM Stock Market Companies?
In recent years The AIM Stock Market has enjoyed a considerable growth in its institutional stock market investor following. Now investing institutions own over 60% of shares in AIM Stock Market companies. Experienced private investors and venture capital trusts also invest in AIM companies.
What timescales is involved?
A flotation on The AIM Stock Market usually takes between 12-18 weeks. It is sensible, however, to allow an additional time prior to the commencement of the formal flotation timetable to undertake an initial feasibility exercise and to assess financial housekeeping.
Want to know more
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