Exchange remains vibrant
Billed as the 'most successful growth market in the world', the London-based Alternative Investment Market (AIM) watched as more than a third of the companies on the index disappeared when the global economic crash hit all markets in 2008. But how is it faring today?
Not just alive but kicking, according to the head of AIM, Marcus Stuttard, who took over as the economy went into meltdown. He says despite tough trading conditions, the exchange remains 'vibrant, relevant and ready for the next generation of investors'.
AIM was launched in 1995 as a replacement for the Unlisted Securities Market. It had just one aim: helping smaller, younger and growing businesses get their hands on the cash needed to grow and thrive.
Companies which have moved up the funding escalator from personal savings, consider AIM as the next step. Although there is no official minimum capitalisation to entry, Marcus insists that the barriers are still rigorous. 'We are a dynamic market, but our investment ecosystem is a delicate balance. We need to ensure there is proper regulation to protect investments, but also that it is cost effective for smaller companies to seek listing.'
AIM ended its first year with 121 listings. Today, there are 1,117, but interestingly, since the market crashed in 2007, there have been only 88 new entries. Companies on AIM have an aggregate market value of GBP71.3 billion (HK$855.5 billion), while overall the market has raised more than GBP55 billion in capital.
The largest single type of company listed is from the financial sector, but oil and gas companies account for 27 per cent of the total value and for the more international flavour of the Market, which represents assets from more than 95 different countries.
For a canny investor the market offers opportunities - and risks. The swings can be spectacular and it's not uncommon to see charts, particularly in mining, swing from 50 per cent return one year, to a loss of more than 90 per cent the following. One of the most successful companies listed on AIM is Britain's largest online fashion and beauty operator, ASOS (As Seen On Screen).
If you had invested pennies in 2001, when it held an initial public offering, you would be fashionably attired with shares trading, despite recent falls, at more than GBP16. Another global brand and AIM entrant has been the luxury English fashion group, Mulberry.
Perhaps it is not surprising, that like fashion, a typical AIM investor can be fickle. Investment expert, Tom Bulford, the editor of Red Hot Penny Shares, says: 'AIM investors run a mile at the first sign of trouble. Over the years, AIM has not had a very good record, in 17 years it has lost one-third of its value, so that's a pretty dire reality. But investors don't always look at the overall picture.'
While he still believes AIM has a valuable place in the British investment landscape he warns: 'There is a constant ebb and flow of companies in AIM and then every so often a huge splurge when a company hits it big. It is a market that will catch out the unwary.'
Partner at accountancy firm UHY Hacker Young, Laurence Sacker, is more positive. He says: 'It is still a great place to raise funds. If you look at AIM's record of fundraising that is evident. More funds are being raised in secondary issues than have been raised from IPO in each of the past five years. There is no other small-cap market anywhere in the world that can offer such performance.'