AIM turns 30: Delistings, doubt and a dose of optimism
AIM turns 30 today, but birthday celebrations are bound to be overshadowed by swathes of bleak data on the market’s performance.
London’s junior stock market has had a woeful period, with projections indicating the index will shrink by a fifth as a result of delisting plans.
The number of companies listed on the City’s Alternative Investment Market fell to its lowest level since 2001 this year after a blitz exodus in the last year resulted in over 70 firms ditching their listing, according to UHY Hacker Young.
Meanwhile, IPOs have stalled, falling to lows of 2008/9, at just ten.
Sitting at the helm of the embattled exchange has been Marcus Stuttard – the London Stock Exchange Group’s Head of AIM & UK Primary markets since 2009.
“There’s a lot of actually that’s sort of consistent,” Stuttard told City AM, as he compared the 2009 rendition of AIM to its standing today.
“We have a very broad church of companies across different sectors, different market cap boundaries, a good spread of UK and international companies,” he added.
“One of the key differences, obviously, is it’s a small market in terms of the headline number of companies.”
Stuttard pointed to the exodus plaguing AIM as a “global market trend”.
The City has felt the harsh bite of public market delisters, with the 88 firms delisting or transferring their primary listing away from the London Stock Exchange in 2024.
But AIM’s boss remains optimistic for the future of the index, telling City AM a key difference between now and 15 years ago is heightened levels of confidence.
When asked what is driving confidence levels amid a bleak backdrop of statistics, Stuttard cited “the wider package of regulatory reforms in the UK”.
Pension fund changes, regulatory reforms and main market changes were all listed as key drivers boosting sentiment.
But as AIM celebrates a milestone birthday, Stuttard will be holding out for any gifts that could bolster the index’s standing.
Tax certainty needed
“Certainty around tax rate” was named as Stuttard’s ideal birthday present from the Treasury.
A leaked memo last month revealed Angela Rayner had lobbied the Chancellor to scrap the inheritance tax on AIM shares in a move she said could raise between £100m to £1bn a year.
This would continue moves made in the autumn Budget where relief on AIM shares was halved.
“Business relief has a huge positive impact on the market and that significantly, by a major factor, outweighs the cost of” Stuttard said.
The rising tax speculation comes after concerns were raised that Rachel Reeves £190bn splurge in the government’s inaugural Spending Review could open a new black hole.
Economists at KPMG noted if growth figures continued to wane, the Chancellor would open up a £20bn gap that would need to be filled to meet her “iron clad” fiscal rules.
Stuttard said the money potentially raised by scrapping business relief would be a mere “drop in the ocean compared to the valuable contribution [AIM companies] make”.
Enter Pisces
London’s new private stock market is edging closer to fruition and with it comes a potential threat.
Small caps exiting exchanges in favour of private market alternatives would be no new feat.
Brighton Pier Group became the latest business to join liquidity venue JP Jenkins after dumping AIM in favour of cheaper administrative costs last month.
“What we are trying to do with Pisces is to relieve that pressure for liquidity,” Stuttard said, “so that should contribute to the long term pipeline for AIM and the main market.”
When questioned on pulling away from listings altogether, Stuttard referenced the “first movers of Pisces”.
“Some of them are in the tens of billions of pounds, so these are companies, certainly in that first cohort, that wouldn’t have come to AIM anyway.”
Brighton Pier Group’s departure put the spotlight on the burden of administrative costs that accompany an AIM listing.
The British Business Bank calculates it costs around £600,000 to list on AIM, followed by £500,000 to maintain a listing.
Asked whether this was too steep, Stuttard didn’t mince words.
“It definitely is,” he said, “I think there are a number of elements to that and I don’t think it’s the AIM rules themselves.”
He said the LSE’s fresh discussion paper will address the evolving nature of market practice.
“We are asking the whole market, companies, investors, intermediaries, what are the elements that add genuine volume and which are the bits that may be either AIM rules or by talking to other regulators, we should be scaling back.”
Embrace the risk
Stuttard praised the work of the City regulator and government in advancing risk amid growth ambitions.
“We need to embrace that risk appetite and I think over the last decade and since the financial crisis, in the UK, we’ve become a bit risk averse.”
He called for the UK to return to “understanding there are huge growth opportunities” across the country.
“There are more than 30,000 visible scaling businesses in the UK, but with the right capital, with the right support, we think aim can be one of those support mechanisms.”
One birthday present Stuttard was not interested in was a takeover.
A group of City executives cooked up a transformation plan for London’s junior market earlier this year, according to Reuters.
The proposal, led by ex-fintech boss Jon Prideaux, was set to rebrand AIM as a “Global Growth Exchange” and widen investor access.
“AIM is not for sale,” Stuttard said, reiterating the LSEG’s stance when the reports surfaced in March.
But Stuttard said the attempt to rebrand the market emphasised “the opportunity that people see. It shows the enthusiasm for AIM and the appetite as it continues to evolve.”
Whilst the market boss has doubled down on optimism and has his eyes locked on fresh opportunity, he noted it will take a “whole range of stakeholders” to help turn the tide.
Whether AIM can kickstart a new chapter remains uncertain but Stuttard’s renewed ambition and optimism is clear.
AIM’s 20s were far from roaring, but should the Treasury and FCA want to turn the next decade into the thriving thirties, they might want to get their gifts wrapped and delivered.