AIM's Foundation for the future

AIM's Foundation for the future

"Over 20 years, the value of AIM and its quoted companies to the UK has been exceptional"

Tim Ward, CEO, The Quoted Companies Alliance

Few might have envisaged when AIM opened its doors, “to little fanfare,” as Reuters put it at the time, with just ten companies to its name, that it would celebrate a 20th anniversary. Much less an anniversary which has seen the market welcome more than 3,500 companies from around the world, raising more than £90bn through new and further issues and becoming, without real compare, the world’s leading growth market.

We believe AIM’s success lies in the four broad principles that have guided the market since its inception.

1. A market open to ambitious growth companies from all sectors

All markets, but growth markets in particular, live or die by their ability to attract and retain a sustainable network of issuers. What informed AIM’s genesis and development has been a deeply held belief that the market should not be defined by a single or narrow set of sectors. Nor that it should it become solely the preserve of companies at a single, particular stage of growth.

In its history, AIM has hosted IPOs from FTSE 350-sized companies down to those valued at less than £5m. And the market is structured to be able to support the needs of these companies from the time of their IPO and throughout their growth journey.

Certainly, the market has seen developments in sectors, reflecting wider global economic trends in mining, oil and gas in the mid-2000s and technology stocks in the late 1990s and at the turn of the decade. But AIM, unlike most other growth markets, has not been hostage to an individual sector’s fortunes. Today, around 1,100 AIM companies represent 40 sectors. London Stock Exchange has an ongoing commitment to ensuring that the market’s appeal is as wide as possible.

2. A market built on a rich tradition of marketmaking, open to investors of every kind

A repeated difficulty for many growth markets around the world has been attracting the number and diversity of investors required to sustain quoted companies through their IPO, but also as they seek further growth capital or support for their balance sheets. AIM’s success has been, in part, due to the fact that it ensures issuers have access to the world’s largest asset managers – a vibrant cohort of retail investors and, thanks to London’s unique status, an unparalleled pool of international capital.

Whilst the number of IPOs and the amount of money they raise is often cited as a key indicator of the vibrancy of any market, AIM’s value in providing a venue for raising further capital and liquidity often receives less attention. Since 1995, more than £50bn has been raised via further issues, allowing companies to access the market across all phases of a company’s growth cycle and throughout difficult periods in the wider economic cycle when other avenues of finance have been closed. That the market can raise additional capital is only possible because of the broad mix of large and small, long-term and short-term investors supported by a buoyant and unique market-making community committed to providing liquidity throughout the business cycle.

London Stock Exchange continues to make every effort to ensure that the market remains attractive to investors of all kinds, promoting AIM to fund managers, as well as educating and informing private investors. We continue to work with the UK’s market-maker community to ensure that liquidity, a vital ingredient for all growth markets, remains as deep as possible.

3. A regulatory approach that recognises the needs and capacities of growth companies

When London Stock Exchange created AIM, two key insights informed its unique structure. First, that growth companies needed a public market which offered an approach to regulation that suitably reflected the nature and size of the companies making their first steps into public life. Second, that younger companies would need the structured support of experienced advisers to introduce them to public life and to stay with them to provide support and advice to help them meet their ongoing disclosure obligations to the market.

Those insights defined the nominated adviser’s role, often called the Nomad model, which is unique to AIM. The key effect of establishing  a role for the nominated adviser has been to facilitate a relationship between young, ambitious companies with experienced corporate advisers who take on an ongoing responsibility to London Stock Exchange to provide companies with advice to help them meet their obligations as a public company.

The global network of these specialist advisers that understands smaller, high-growth businesses is crucial to the market’s success. Alongside the dedicated nominated advisers, there is a network of lawyers, accountants and brokers, as well as public relations and investor relations agencies, which help companies join the market and understand their ongoing obligations to investors and shareholders.

Whilst the infrastructure that has built up around AIM provides muchneeded support for its companies, a core principle remains that, first and foremost, companies themselves are responsible for adhering to both the
spirit and letter of the AIM Rules. If they fail to meet their obligations, AIM Regulation remains vigilant, investigates and, where necessary, takes action to enforce the AIM Rules.

Our belief in AIM’s approach to regulation and disclosure has been reinforced over the last 20 years in great part by the value it has created for companies, their investors and the economy alike, and because of the community that has been created around the market’s regulatory framework. While AIM will naturally evolve and adapt over the next 20 years, we remain fully committed to the same core principles that first guided us.

4. A market open to learning and evolution

AIM’s success has not been without growing pains, moments of difficulty or introspection. We acknowledge, for example, that at times the market has perhaps grown too quickly, only to shrink later. We are committed to working to ensure that issuers and investors make use of the market, fully understanding not only the benefits but also the risks and obligations of doing so. There is always more that we can do, and are doing already, to help companies, investors, nominated advisers, market-makers and the wider AIM community to access the market as fully and transparently as possible.

Where we have had to make difficult decisions or impose sanctions over the years, we feel we have done so in the best interests of the market, trying to balance the needs of all of its users. AIM is a healthy, vibrant and successful market that balances its founding values with the need to adapt and evolve over time. We are grateful to our stakeholders that they continue to provide constructive feedback and take an active role in the development of the market. These four founding principles have guided us in our stewardship of the market over two decades. On the occasion of AIM’s 20th anniversary, we reaffirm both our commitment to those values and our wholehearted promise to build, together with the broader community, AIM’s future on these foundations. We celebrate 20 years of the world’s most successful growth market, and we look forward with optimism to the next 20 years.