New figures show that the London Stock Exchange’s AIM market saw the highest number of new companies listed in Q2 since 2018. Here is a breakdown of the data and a peek at the future of this market.
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What is the AIM market?
AIM, which stands for Alternative Investment Market, is a sub-market of the London Stock Exchange. The market was set up in 1995 and is mainly targeted at smaller, fast-growing companies.
AIM provides a platform for these companies to issue shares to investors and raise capital to fund their growth.
The primary attraction for companies on the AIM market is its less complex regulatory environment. This makes going public possible for many small, fast-growing companies that would otherwise not meet the traditional market-listing criteria. However, the less stringent regulations also mean that the market is riskier and more volatile.
There are currently more than 820 companies on AIM from all over the world, some of which you might never have heard of, but also a few well-known names, such as ASOS and Jet2.
What happened to the AIM market in Q2?
Helped by a recent boom in UK IPOs, the AIM market grew for the first time since Q3 2017, increasing by a net five companies in Q2 2021. This is according to new research by national accountancy group UHY Hacker Young.
More interestingly, Q2 saw 16 new companies listed on AIM, which is the highest number since Q2 2018.
Meanwhile, the stats show that just four companies were forced to leave this market last year due to financial distress and insolvency, the lowest number on record.
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Why is the future outlook of this market positive?
According to UHY Hacker Young, there has been an improvement in the overall quality of companies on AIM. This is certainly good news for investors in this market.
The reputation of the market is growing, as evidenced by the fact that insolvencies of AIM companies are becoming quite rare. Indeed, more companies have left the market in the last year for takeover reasons (55%) than for insolvency reasons.
The improving quality and reputation are credited partly to more stringent quality control.
Daniel Hutson, partner and head of audit at UHY Hacker Young explains: “The increase in regulatory scrutiny that AIM has been subject to has meant that many poorer quality companies have left the market or chosen not to list, leaving behind a far higher quality pool of companies.
“AIM is now a much more robust market than it was in the last recession – it has better companies, better regulation, and a better orientation towards growth sectors like technology.”
How can I invest in this market?
It’s quite easy to buy the shares of AIM-listed companies. All you need is a share dealing account that gives you access to the AIM market. To help you make a good choice, we’ve reviewed and rated some of the UK’s top providers of share dealing accounts.
You also have the option of investing in AIM through a stocks and shares ISA. Any investment growth or income earned from investments held in a stocks and shares ISA is tax free. That means you get to keep more of your earnings, which could help you achieve your financial goals more quickly.
Just keep in mind that all investments are inherently risky. As mentioned, AIM shares can be volatile. In fact, it’s not uncommon for AIM shares to move up and down by double-digit figures in a single day of trading. So, before you invest, do your homework and seek professional advice if necessary.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in the future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
