The Phenomenon that is AIM

Source: Stock Market Digital

Date :22/05/2007 14:54:01

Last year was another record year for the AIM. It is now a vital link in the risk capital financing chain, writes Martin Graham.

One recent magazine article described the growth of AIM as ‘nothing short of phenomenal’. The statistics speak for themselves. Last year was yet another record year with the amount of money raised almost double that of 2005, which was almost double that of the year before. The total value of shares traded on AIM in 2006 was £58 billion, up 23.3 percent on the comparable figure for 2005.

AIM has truly come of age. It is now a vital link in the risk capital financing chain - supporting innovation and enterprise across the UK and increasingly the world. More and more small and medium-sized companies from across the globe are looking to AIM as a way to take their business to the next stage of their growth.

AIM’s key attraction is the same today as it has always been. AIM combines access to the deepest pool of funds under management in the world with a regulatory framework and approach uniquely suited to smaller companies. Its streamlined admissions process has proven very attractive to companies who want access to capital without a vast increase in their regulatory burden.

So why has AIM become so successful in recent years?

The first reason has been that AIM has achieved critical mass. There are now over 1600 companies on the market from 39 sectors. They cover a broad range of sizes and industries. AIM increasingly reflects a wide range of countries too. An influx of overseas companies on AIM has been a key feature of its recent development. In fact, the number of international companies has increased six fold in the last four years - from 50 companies in 2002 to over 300 today. In the words of one newspaper “AIM is becoming globalisation’s small-cap market place”.

Secondly, AIM has become a proven way to raise growth capital. Last year AIM companies between them raised around £15.7 billion that compares with less than £1 billion four years ago. In fact, in the past two years alone, AIM companies have raised more capital for growth than in the first 9 years added together. As a result of this impressive record there are now very few companies looking for an international listing that would not consider AIM as an option.

In fact, AIM is now the number 6 stock market in the world in its own right, in terms of money raised. Last year AIM companies raised around the same as the whole of Nasdaq and substantially more than major exchanges in Frankfurt, Tokyo, Toronto and Sydney. This is a phenomenal development considering AIM is only 12 years old this year, and is a market where the average size of company is considerably, and deliberately, less than these other established markets.

Thirdly, AIM stocks have become a mainstream asset class. Almost every institutional investor now has some exposure to the market. In 2003 a survey by Growth Company Investor found that 35% of AIM shares were in the hands of institutions. Today, that figure is 56.7%. This underlines just how much AIM has changed from a retail dominated market to a professional market in the space of a few years.

Going forward, there are a number of challenges AIM will face, not least how growth can be controlled and the quality of the market safeguarded. We have recently reviewed the operation and regulation of AIM to make some evolutionary improvements. These changes aim to highlight and encourage best practice among companies and advisors whilst not undermining AIM’s winning formula.

We believe these changes will strengthen AIM as it approaches its 12th anniversary and enable AIM to go from strength to strength in the year ahead.

Martin Graham is Director of Markets, and Head of AIM, the London Stock Exchange www.londonstockexchange.com