Analysis – London’s withering AIM market will lose more members this year By Reuters
Written by Amy-Jo Crowley
LONDON (Reuters) – An exodus of companies from London’s Alternative Investment Market (AIM) will extend to 2025, as British policymakers try to revive the country’s capital markets, banks and financial advisers to AIM companies told Reuters.
Already in 2025, in Britain Alliance Pharma (LON:) agreed to sell itself to asset management firm DBAY Advisors, and internet marketing firm Team Internet said it has found ways to take money from private equity bidders.
This category is 30 years old London Stock Exchange (LON:) is designed to help smaller companies secure capital, with fewer listing requirements than the larger market.
But now a growing number of AIM members are considering delisting or selling themselves as market prices have fallen and changes in British tax laws have made these listings less attractive.
“We are seeing an increasing number of AIM company boards considering their options, including conducting a private or public sale process, and – particularly at the larger end – there is a growing trend for AIM companies to consider moving to a larger location. market to benefit in part from more acquisitions,” said Marc Jones, managing director specializing in M&A at Peel Hunt.
UK officials introduced a series of listing changes last year aimed at helping London compete with New York and the European Union after Brexit. This loosening of listing rules has yet to produce any significant change in initial public offerings (IPOs), however, which have coincided with a long-term outflow of UK funds.
A total of 89 companies left the junior exchange last year, only 18 joined. That compares to 2021 when there were only 54 departures from AIM and 66 additions.
And a third of AIM companies with a market value of 50 to 250 million pounds ($61-305 million) are at risk of bids, according to Peel Hunt.
AIM shares are trading 30% to 40% below their 10-year average as investors have pulled more money out of the UK currency, compared with a 10% to 20% discount in the 250 markets, Graham said. Simpson, head of Quest Research.
“The disappearance of AIM would be a disaster,” said Simpson, adding that it would be an admission that Britain does not care about supporting entrepreneurs, start-ups and growing businesses.
Simpson blamed an outflow of UK equity funds and a “reluctance” to invest in smaller UK companies given their poor performance in recent years.
UK-focused equity funds have seen their 41st consecutive month of outflows, the driver of most departures from AIM, according to Panmure Liberum deputy chief executive Bidhi Bhoma. At the same time, there has been a shortage of IPOs to combat takeoffs.
“It is an economic issue for the UK as there is a huge amount of job creation and significant tax revenue for the UK economy that comes from having a vibrant AIM market,” said Bhoma.
Another recent innovation for some of the 600-plus AIM-listed companies to exit the index is the halving of inheritance tax, says Peel Hunt’s Jones.
Previously, owners of AIM-listed businesses were allowed full exemption from inheritance tax on their shares. But in her budget on 30 October, finance minister Rachel Reeves slashed that exemption, and AIM-listed investors now face an effective 20% tax on their capital.
To reverse the decline, Bhoma said another solution would be to authorize pension scheme operators to allocate a small percentage of their assets to the UK.
Quest’s Simpson has proposed bringing back schemes for UK tax-free savings accounts that are invested in British stocks.
Many of the problems facing AIM are also being felt on the larger exchange, which has seen a decline in the number of IPOs and a string of large takeover deals over the past year. Some companies are also switching their listings to the US to get better prices.
Certainly, analysts see a reversal of equity flows to Europe that could slow the situation and reinforce new problems in London.
“Even though we are seeing green shoots, we have to fix this money problem that exists in the UK and that will fix the IPO appetite of private companies,” said Bhoma.
($1 = 0.8241 pounds)
