New kid on the blockLaunched just over two decades ago in 1995, Aim is less tightly regulated than the main markets such as the FTSE 100, but has, nonetheless, been the platform from which many businesses – including Domino’s Pizza and Asos – have gone on to achieve greatness. Like many markets, Aim peaked in size in 2007 before the credit crisis and subsequent global economic downturn sent values plummeting. But unlike peers which have recovered much of their lost ground, Aim is still stalling. According to statistics from the London Stock Exchange, there has been a sharp drop in the number of companies listing on Aim, with the total near halving from 76 in 2010 to just 47 in 2015. It is far below the peak of 399 seen in 2005. The value of new money coming onto the market is also tumbling. Collectively, new and existing Aim companies raised £5.5bn in 2015, down from £7bn in 2010. In the last year alone it saw inflows drop by £400m, while the number of admissions to the market halved. Meanwhile, the growth of crowdfunding is impressive. Last year, the total value of all investments increased by 295 per cent, from £84m in 2014 to £332m. Moreover, the average age of companies raising on crowdfunding platforms has increased to 3.32 years, showing a widening appeal that extends beyond very early stage startups.
If this market grows at a similar rate this year and Aim fails to reverse its downward trend, alternative finance will overtake the London Stock Exchange’s junior market. Even the argument that Aim offers more protection for investors is redundant, with one of its biggest supporters recently commenting on what a jungle it can be when it comes to finding the right stocks to back. Harry Nimmo, the famed smaller companies investor who has run the Standard Life Investments UK Smaller Companies fund for almost two decades, told Investment Week that at least half of Aim is made up of conceptual or blue-sky investments which have no revenues and should be avoided. That is not to say there are no opportunities within Aim – of course there are. But investors may struggle to back the right investments, especially as their knowledge and understanding of what many of the companies actually do will be limited.