Three decades ago, the Alternative Investment Market – or AIM for short – was launched. In this article we take a look back at how it all started, what have been the highs and lows and where it might go from here.

Is it still an attractive place for innovative growth companies – described by the London Stock Exchange as ‘the lifeblood of the global economy’ – to raise vital equity capital and trade their shares?

We get the views of a fund manager who invests in smaller growth companies, along with those of executives themselves on what life is like for companies on AIM, and we pick four stocks which we think embody the pioneering spirit of the market.

ROLLING BACK THE YEARS

AIM was launched 30 years ago to the day, on 19 June 1995, as a junior market to replace the USM (Unlisted Securities Market) and attract smaller, less-developed companies than those traded on the main market.

With a ‘light-touch’ regulatory system, AIM in theory offered a more flexible way for nascent companies to raise capital and the exchange started out with 10 companies valued at a collective £82 million.

Of those 10 firms, just one is still quoted – Athelney Trust (ATY) – but it is no longer on AIM and couldn’t be described as a roaring success given its current market capitalisation of less than £5 million.

Most of the rest – Brancote, Dawson Holdings, Country Gardens, Gander Holdings, Lorien, Norholmes and Old English Pub – were taken over, while Formscan changed its name to Inspectron before leaving AIM in 2009, and Norcity II went into liquidation not long after joining the market.

That’s not to knock the market’s achievements – since its inception it has helped more than 4,000 companies raise nearly £136 billion in financing, benefitting their staff, customers, investors and local economies.

In 2024, companies on AIM raised £1.6 billion, while the average market cap was just over £100 million and the average post-IPO price performance was 47%.

A recent study by Grant Thornton calculated that in 2023, AIM companies supported over 770,000 jobs and contributed £68 billion of ‘gross value added’ to the UK economy, with the average AIM company contributing more than £87,000 of GVA per employee against a national average of just over £58,000 per employee.

WHAT IS LIFE ON AIM LIKE?

The London Stock Exchange promotes AIM as ‘built for smaller companies’, with simple requirements including no minimum free float, no minimum market cap and a minimal financial track record.

Benefits include ‘funding from a range of investors to support your organic expansion’ and the ability to ‘promote your company’s brand and story on an international scale and access new opportunities’, all within a respected, balanced and fair regulatory environment and legal framework ‘so you can get on with running and growing the business’.

In that case, why have so many companies, this year alone, decided being on AIM doesn’t work for them and subsequently delisted their shares, leaving small investors stranded?

The three main reasons firms have given for leaving AIM are the cost of listing, the burden of regulation and the lack of liquidity in their shares.

Shares canvassed the opinions of a handful of highly placed executives at several AIM-quoted firms, and the answers were extremely revealing.

The chief executive of one company, which has been on AIM for 20 years, said: ‘The annual cost of maintaining a quote, including exchange fees, is around £750,000. Over 20 years, that’s £15 million which I haven’t been able to pass on to my shareholders.’

Meanwhile, in terms of regulation, the gap between the junior market and the main market has become narrower and narrower over the last two decades, and the introduction of the QCA (Quoted Companies Alliance) code of conduct will impose even more burdens and costs on smaller companies.

For those with a small executive team, the administrative burden imposed by AIM means the idea of being free to run and grow their businesses is pie in the sky and nothing more.

As far as liquidity goes, ‘bad news gets amplified on AIM’ says another executive, leading to a vicious circle where buyers step away and trading dries up, leaving sellers and even business owners with little visibility.

Even on a good day, the bid-offer spread on many AIM stocks can be 10% to 15%, compared with fractions of a percentage point for main market stocks, which makes them unsuitable for trading.

Another executive adds ‘There are just too many mediocre companies on AIM,’ which means ‘good companies aren’t fairly valued any more’.

Finally, government changes to the IHT (inheritance tax) regime in the 2024 Budget have made it less attractive for investors to own shares in AIM-quoted stocks. IHT relief was cut by 50% and there are concerns it could be taken away altogether.

A FUND MANAGER VIEW

Dan Green, who manages the FTF Martin Currie UK Smaller Companies Fund (B7FFF70), draws around 30% of his portfolio from the AIM market.

He says: ‘Going back to the start of AIM it being 10 stocks and an £80 million market cap to today over 600 stocks and over £60 billion market cap then you’d say its been a massive success over the last 30 years. The last four years in particular have been tricky. The future of AIM has never looked as uncertain as it has today.

‘We’re fairly agnostic about where companies are listed but if you look at the 600 stocks on AIM today we are probably only interested in around 40 or 50. AIM has become more mature, back in the early days only around 30% of the stocks were profitable and 70% are now profitable on AIM.

‘There seems to be this vicious cycle at the moment, with companies feeling the flows are not going to AIM, which results in valuations not reflecting the qualities of the underlying businesses and businesses are being acquired or deciding to exit.’

Looking at companies which have moved from AIM to the main market in the past, Green highlights Alpha Group (ALPH) which listed on AIM in 2017 with a £67 million market cap. It moved from AIM to the main market in May 2021 and it’s a £1.3 billion company which is now subject to a bid.

Green notes that the ease of raising money, compared with the main market is still a key selling point for AIM. Rosebank (ROSE:AIM) – a venture set up by former executives from one-time turnaround specialist Melrose (MRO) – recently raised £1.14 billion for its first deal – the largest fundraise in AIM’s history.

Green adds: ‘AIM doesn’t really attract any passive funds; they could move AIM into the All-Share and MSCI indices to get passive flows. Tax breaks could be offered on IPO costs to make sure its an attractive place to list.’

‘At the moment we go through the shareholder register and look for the percentage held by IHT funds – changes to the Budget mean flows here have slowed down or stopped. The Government could provide some certainty that the reduced IHT relief will be maintained.’

Green highlights mobile payments company Boku (BOKU:AIM) as an example of an excellent AIM company.

‘Boku is a 20% revenue growth business, it’s profitable and makes 30% operating margins, has cash on the balance sheet and is worth £500 million today. If this listed in the US it could probably be four times that.’ [TS]

OUR TOP AIM PICKS

Anpario (ANP:AIM)

Price – 425p

Market cap: £86.9 million

Growth investors seeking a quality small cap with a track record of topping analysts’ estimates, positive trading momentum at its heels and offering a progressive dividend should buy Anpario (ANP:AIM). The maker of natural sustainable feed additives for animal health, hygiene and nutrition is reassuringly diversified by geography and species, winning market share and widening its moat through investment in innovation, since competitors struggle to replicate its science-backed products.

The £86.9 million is profiting as food producers around the world transition to natural feed solutions and away from banned or toxic feed chemicals and antibiotics and the safety and sustainability of global food production increases against a backdrop of population growth. Crucially, the company is well-placed to limit US tariff impacts following the acquisition of Bio-Vet, which brought Anpario a modern US production facility from which to expand and shift UK production should the need arise; Bio-Vet’s unique technology helping dairy cows recover quicker from the impact of avian influenza is currently in big demand.

Anpario’s forecast-beating results (31 March) for the year to December 2024 revealed a 76% surge in taxable profits to £6.1 million on revenues up 23% to a record £38.2 million. Balance sheet strength is another plus at Anpario, which closed the year with £10.5 million net cash in the coffers, which should enable the company to expand its international presence, explore complementary acquisitions and enhance earnings through share buybacks.

Shore Capital forecasts a rise in pre-tax profit to £6.4 million on £44.7 million revenue this year, building to £6.8 million and £47 million respectively in 2026. Based on the broker’s 29.8p earnings estimate for the current year, and a forecast dividend hike to 11.8p, Anpario trades on a prospective p/e of 14.3, a significant discount to history, and offers a cash-backed yield approaching 3%. Shares sees scope for a significant re-rating, so long as Anpario delivers against its winning strategy and cultivates further earnings upgrades. [JC]

B.P. Marsh & Partners (BPM:AIM)

Price – 671.7p

Market cap: £248.4 million

For the uninitiated B.P. Marsh (BPM:AIM) is a specialist private equity investor in early-stage financial services businesses in the UK and internationally. Chief financial officer Dan Topping says investors should think of the company as a ‘mini-Berkshire,’ referring to the Warren Buffett backed conglomerate which takes a similar approach, and which is also heavily invested in the insurance sector.

Essentially, the company is looking to back management teams and entrepreneurs with credible plans for growth and typically invests around £5 million to take a 20% to 40% stake, with a preference for the rest to be controlled by the management team.

While prioritising high-conviction opportunities, the management is also focused on returning surplus liquidity to shareholders through dividends and share buybacks. The group has a strong track record of growth and has delivered a compound annual growth rate in NAV (net asset value) of 11.1% a year since the business floated on AIM in 2006, and 13.1% a year since inception in 1990.

NAV at the group’s financial year end on 31 January 2025 was £326.4 million, or 847.3p per diluted share. This means the shares trade at an unwarranted discount to NAV of just over 20%.  The group delivered a strong year of growth in 2025 with NAV increasing 42.4%, an uplift on the 20.9% growth in 2024. Total return including dividends was 44.2%.

The group is debt free and had cash on the balance sheet of £74.1 million at the period end, equivalent to around 30% of the company’s market capitalisation. In addition to selling at a 20% discount to NAV, the shares trade on a lowly PE (price to earnings) ratio of 5.9 times and offer a dividend yield of 2.2%, covered twice by earnings, demonstrating great value, growth and income. [MG]

Cerillion (CER:AIM)

Price – £15.34

Market cap - £452 million

Regular Shares users will likely be familiar with the Cerillion (CER:AIM) story – we’ve been writing positive things about it since it listed stock on the London market nearly a decade ago at 76p per share with a market cap of just £22.4 million.

And how right we have been to, as the company carved out its reputation on an integrated enterprise billings and customer relationship management software platform sold to medium-sized telecommunication firms. Over the years, it has refined that reputation as a real specialist, expanding the suite to cover charging, interconnect, mediation, and provisioning solutions, moves that are starting to see bigger telecommunication companies join the fold, including Virgin Media.

And that operational progress has paid off for shareholders in spades, the stock recently standing at £19 for a rough £550 million market cap, implying 2,355% growth since. Morningstar calculates compound average growth at 45% a year over the past five (Cerillion’s time as a public company just misses the 10-year data qualification).

That was before founding chief executive Louis Hall decided to flog a chunk of his 30%-plus stake, announced after the market closed on 11 June, at £15 per share. We imagine that most of Hall’s private wealth is tied up in Cerillion stock, and Shares recent chat with him left us in no doubt about his commitment to the firm’s growth ambitions for the foreseeable future.

‘We continue to view long-term prospects with confidence’, Hall stated alongside recent (19 May) interim results. He has also committed to sell no further shares for at least a year. But selling down his stake to about 25.5% of the company has knocked market confidence, demonstrated by the sharp share price drop on 12 June.

Since no new shares are being issued, there’s no dilution to existing holders, which we believe creates an opportunity to pick up stock at a discounted price when nothing has really changed to the investment case. Long recognised as a high-quality business it has seldom been cheap, but it does mean the 2026 (to end September) PE (price to earnings) multiple is now 27 versus 32 just days ago. Great business, great execution, great opportunity. [SF]

Young & Co’s Brewery (YNGA:AIM)

Price – 965p

Market cap: £594.8 million

Since joining AIM in February 2008, the pubs, and hotels group Young & Co’s Brewery (YNGA:AIM) has had its fair share of ups and downs.

The Covid pandemic was an obvious low and investors have been somewhat nervous of the stock since its acquisition of junior market rival the City Pub Group in November 2023 for £162 million.

Concern about the extra debt this loaded on to the business is understandable but with the integration now complete, Shares believes this premium pub, and rooms operator has proved itself to be a cut about the rest. Essentially, its estate of pubs are smart places people want to go for a night out.

The company reported a robust set of results for the 12 months to 30 March in early June with revenue up 24.9% to £485.8 million like-for-like revenue growth of 5.7% and debt reduced by £19.5 million.

The pubs group is good at rewarding shareholders, raising its dividend per share 6% to 23.06p. This is underpinned by healthy cash generation with a 25% increase in free cash flow for the year to £54.2 million.

This cash has also allowed it to invest in the business, completing 32 projects this year including five-bedroom upgrades at the Guinea Grill, in Mayfair London and The Libertine in Bournemouth.

Two new pubs have opened also after large investment in  Tattenham Corner, Epson and Tellers Arms, Farnham.

Peel Hunt are forecasting 8% growth in pre-tax profit in the second half of the year (versus the first half) due to new improved drinks contracts and higher like-for-like sales of 7.8%. Higher costs associated with the increase in the national living wage and employers’ national insurance contributions in last year’s Budget are an obvious challenge but one the group seems to be managing.

‘If the company holds back price increases, as we assume, it should benefit from rising volumes if competitors raise prices more, reduce opening hours, cut staffing and service levels, or just close,’ Peel Hunt adds. [SG]

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