As the UK economy recovers and there is a renewed focus on nurturing SMEs to innovate and contribute to growth, AIM marks its 15th birthday later this year. And, there is certainly reason to celebrate as even in difficult market conditions, AIM has demonstrated its vital role in the SME funding environment through having raised £5.5 billion for companies in 2009.
Over the years AIM has helped ambitious, growing companies raise over £65 billion at admission and through further fundraisings. The community of Nomads, market makers, investors and other advisers that has developed around AIM; the range of industry sectors and jurisdictions represented by AIM companies; and the evolving regulatory framework of the market have together contributed to AIM’s success.
Wider economic conditions and reduced bank lending over the last two years have had a disproportionate impact on the ability of SMEs to gain access to finance. This has impacted AIM, with the global IPO market quiet and a number of the smallest companies choosing to reassess their costs, and evaluating whether being on a public market was still appropriate for them. However, the fact that existing companies were able to raise around £8 billion through further issues over the last two years demonstrates ongoing investor willingness to support smaller businesses.
Looking ahead, as the first quarter of 2010 draws to a close, there is increasing optimism in the market as the IPO pipeline and M&A activity is growing. Nevertheless, extending the visibility of companies and ensuring a liquid trading environment remain priorities, underpinning investor confidence and ensuring that companies maximise the benefits of being on AIM.
As the market operator we remain committed to providing an efficient environment for SMEs to raise capital. Of course, this is not possible without the involvement of companies themselves, advisers and other market participants. We continue to work with our stakeholders to develop AIM to ensure it provides an efficient platform for companies to raise capital and build their profiles.
We also remain proactive in explaining to policy makers and politicians the importance of a vibrant growth market in the SME funding ladder. Our focus is on preserving the fiscal incentives around AIM and ensuring that growth markets positively benefit from any changes at the European level.
More specifically, we are working with the QCA to lobby for AIM securities to be eligible for ISAs and we are calling for changes in Venture Capital Trust (VCT) legislation by allowing participation in secondary market trading and increasing investment criteria. We believe these changes will improve market liquidity and widen the population of companies that can benefit.
At a European level, we are engaging with other market operators, the venture capital industry and policy makers to discuss and identify solutions to alleviate challenges for SMEs seeking access to finance. We are optimistic that the ongoing Prospectus Directive Review will include amendments to the benefit of smaller companies.
I believe that AIM’s framework and the extensive network of participants that supports it will continue to ensure that AIM remains the most compelling offering for growing companies seeking to raise funds on a public market. AIM has an integral role to play in the economic recovery, and London’s continuing role as the world’s leading international financial centre.
Marcus Stuttard is Head of AIM at the London Stock Exchange
