DIY Investor Magazine
/
2015 Issue
36
CAN AIM HIGHER?
HOW IS GROWTH COUNTED?
In a Stock market context, it’s the increase in financial
value, nothing more. The graph below shows that AIM
(grey-line) could be considered not to have had much
to celebrate at its twentieth birthday soiree on the 19th
June.
The AIM market is at a lower level now than when it
started in 2004. Out of the 3,500 or so companies that
have raised funds on AIM around 1,100 are currently
listed.
The biggest successes are the 4% (or 15 Star
Performers) that have grown to become FTSE 250
stocks.
The initial Market Cap of the smallest star that grew to
shine so bright, was £89m.
This opportunity for stellar growth is just not available
in larger caps, but we can see from the Small Cap Index
performance (yellow-line) that this growth is not being
reflected by the AIM Index.
Twenty years on, Beaufort Capital Markets’ Jon Levinson considers the
performance of the LSE’s Alternative Investment Market and concludes that its
contribution far outweighs that suggested by a FTSE AIM All Share Tracker
AIM was constructed as a ‘lite’ compliance and
regulatory system, originally designed to let the ‘market
decide’ via the Nominated Advisor system. The practice
over the 20 years has been for the regulators to issue
increasing guidelines on best practices, which are
admirably aimed at improving liquidly.
Market Theory and Regulatory Practise are challenged
with small AIM companies.
To improve liquidity or trading volumes, AIM has
regulatory guidance on companies websites, its news
flow, with ‘add guidance’ on the suitability, percentage
free float and size of fund raise.
This reduces transparency and adds to cost of the
listing. Higher listing costs seem to have been passed
on as an increase in IPO Market Cap of AIM companies,
but without necessarily any increase in the value of the
underlying investment proposition. AIM investors have
been paying more for less performance. The graph
above shows the AIM All Share’s 20 years of under
performance in all but the
Dot.com
manic period of
2000, which was the equivalent of the South Sea, Tulip
and Bitcoin bubbles.
The mining semi surge between 2003- 2008 was
never really convincing, with too much digging and not
enough producing to add sustainable value.
