The Alternative Investment Market (AIM) in London is experiencing a severe downturn, with its smallest size in 23 years in 2024, as 92 firms delisted, leaving only 695 companies compared to its 2007 peak of 1,694. This decline is attributed to a lack of liquidity, low trading volumes, and erratic share price movements, which deter firms from listing and even lead some to delist in favor of private markets. The market's inability to attract scaling and emergent businesses has left it reliant on legacy firms, such as energy and finance stocks, which lack high growth potential.
The cost and complexity of a public listing, estimated between $2 million and $3 million in fees, remain a significant deterrent for companies. Many now prefer to stay private and access the growing capital pools in private markets. Over the past three years, the number of companies on AIM has fallen by a quarter, and its market capitalization has halved. For instance, in the year to February, only 10 companies joined AIM while 61 left, either through takeovers, folding, or going private. Aberdeen Asset Management noted that 61 companies with a combined market capitalization of $12 billion were expected to leave in one year alone.
The UK government is attempting to address these issues, proposing a new Private Intermittent Securities and Capital Exchange System (PISCES) to facilitate intermittent trading of existing private company shares. This initiative aims to provide investors with a standardized exit route and encourage more capital deployment into private investments. However, many believe that AIM is already on its knees, with private markets poised to deliver a "fatal blow." Critics argue that private market trading platforms will emerge as more advantageous alternatives to public venues like AIM, which struggle with liquidity and burdensome listing processes.
Despite the overall bleak picture, some successful companies like Fever-Tree (market value of $1.1 billion), Jet2 ($3.8 billion), and Young's & Co Brewery ($519 million) remain on AIM. However, these successes are overshadowed by numerous failures and scandals, where shareholders, often private savers, lost significant capital. The overall performance of the FTSE AIM All Share index has been disappointing, falling even with dividends reinvested, especially when compared to the FTSE Fledgling Index, which has gained over 1,000% in the same period.
