For every monolithic company, there are hundreds of others vying to take the next step up the ladder. While a FTSE 100 listing may seem like a pipe dream to many, everyone has to start somewhere. And for many companies, the place they are first listed is on the Alternative Investment Market (Aim).
Viewed as the full stock market’s younger sibling, Aim allows firms to list their stock without having to meet the strict criteria of the full market. For businesses, it is a way to raise funds when loans are inaccessible or not an option. For investors, it is a way to – hopefully – find the shooting stars of the future and profit with them on the way up. And for those looking to reduce their inheritance tax (IHT) liabilities, Aim stocks offer a useful shelter.
There are various ways to access the potential growth of Aim stocks. Aside from buying direct, they can be found in enterprise investment schemes (EISs), venture capital trusts (VCTs), IHT portfolios and even some collective funds. Household names such as clothing and accessories companies Mulberry and Asos can be found on Aim, along with lesser-known firms spanning everything from energy to services. For some, it is an active choice; for others, it is a route up to the main market. Takeaway food chain Domino’s Pizza partially floated on Aim in 1999, moving to the main market in 2008 and today is a FTSE 250 constituent.
But the market is not without its downfalls. Business is brutal and, however good an idea may be, not every company makes it. Criteria for inclusion on Aim are far more flexible than the full market, potentially opening investors up to a much greater level of risk than they are used to.
What’s in an Aim?
The word ‘alternative’ in Aim does not mean the same as the ‘alternatives’ used when referring to investments such as art and fine wine. While there may be companies listed on Aim that are involved in quirkier assets, the ‘alternative’ bit refers to the company structure, ownership and history requirements compared to the main market, rather than any reflection on their business type.
According to the London Stock Exchange (LSE), more than 3,100 companies have joined Aim since its launch in 1995, raising in excess of £79bn between them. It was set up to allow smaller or newer companies access to capital while allowing investors to share the spoils of any growth.
