Record pay-outs but no money – does AIM have a problem?

The first, in the Financial Times highlighted that fundraisings in 2019 are on course to be the market’s lowest in 20 years.  It is suggested that this could be a result of AIM’s lower regulatory burden creating a ‘financial wild west’ with one Australian based hedge fund manager reportedly describing AIM as a ‘cesspit’.

Whilst there is no doubt that AIM has, historically, suffered its fair share of corporate failures, to describe the market as a cesspit and the ‘probably the worst market in the Western World’ is pure hyperbole.  AIM is unique in both its focus and success and that is in large part due to the flexibility of its rulebook.  The market caters for companies whose market capital ranges from the thousands to the billions across a wide range of sectors – and it would be impractical to expect a prescriptive set of regulations that can accommodate both.

In the last five years AIM and the Nominated Advisers have undoubtedly tightened the level of regulatory scrutiny, whilst seeking to preserve this flexibility – and to our eyes, the historic criticisms reflected in the FT piece have certainly been long addressed.   Indeed to point to AIM’s flexibility as leading to a reduced level of fundraisings does rather ignore the current uncertainty surrounding the economic climate which will undoubtedly impact investor appetite for smaller, developing and entrepreneurial companies over established blue chip shares.

So far so predictable. However an interesting contrast is the recent report published by Link Group highlighting that dividends paid out to investors by AIM companies jumped 24% to a new a record total of £633m in the first six months of 2019, with investors on target to pocket well over £1bn from AIM listed companies for a second year. Whilst dividends on AIM remain a relative rarity, particularly when compared to companies listed on the Main Market, this can be seen as a symptom of the growth nature of the market.

Against the negativity of the FT’s article, this report demonstrates the success of those companies that have benefited from AIM’s flexibility and having moved through their capital hungry phase and have grown to become highly profitable for their investors.

It is inevitable that AIM will see a relatively high proportion of failures – it is a growth market and not without its risks.  However the historic accusations repeated in the FT article are currently unfounded and, what can be seen is that with the right structures and adviser team in place, the market provides a unique and strong environment that allows companies to develop from start-ups through to billion pound success stories.