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What is the Alternative Investment Market?

28/10/2020

For many investors, the ability to invest in smaller, less-developed companies is a tempting approach. By their nature, these companies that are looking for investor funds in order to successfully scale can offer high returns in some cases – but how can investors find such businesses? 

One option is the Alternative Investment Market (AIM): a London Stock Exchange sub-market that has been around for over 30 years. Here, we explain the AIM in more detail. 

 

Why did the AIM begin?

The Alternative Investment Market began in June 1995, listing just ten businesses with a total valuation of £82m. Since then, it has grown to include over 850 companies, with a £104bn combined market cap. 

At the time, listing on the London Stock Exchange would require small businesses to spend a prohibitively high amount of money, and adhere to incredibly strict requirements which, for many, simply couldn’t be met. These requirements include three years of trading and a minimum market value of £700,000, among others – requirements that are impossible for a fledgling company. 

AIM does not have these requirements – meaning that smaller and newer companies are still able to float. 

 

What are the pros and cons of investing on the AIM?

For some, the tax benefits available to those investing on the AIM are a key reason why they choose to invest: benefits like Capital Gains Tax relief and Business Property relief. 

With many of the companies listed being newer, growing companies, the AIM can also appeal to investors because of the potential for rapid growth. ASOS, for example, was listed in 2001 for 20p per share – a figure that reached £45 per share in August 2020. 

However, with AIM-listed companies tending to be newer than those listed on the London Stock Exchange, there can be the same risks as when investing in startups. The number of delistings from the AIM is also higher than the number delisting from the main market.

Any investment holds some degree of risk, but with less information about AIM-listed available due to their newness, it is important to establish what level of risk you are willing to take before investing. 

“Stable Rise Limited is not authorised or registered by the Financial Conduct Authority. The marketing materials are not intended to provide financial advice nor promote any individual financial products.”

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Alternative Investment (AIM)

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