Is AIM a finance option for potential fintech unicorns?
The Alternative Investment Market (AIM) is a sub-market of the London Stock Exchange, which was launched on 19 June 1995 to allow smaller companies to float shares with lighter regulation than the main market.
In the last few years, AIM has had difficult times. With smaller companies, in particular. Many have de-listed, as a result of acquisitions and less happy circumstances. Now, AIM seems to be attractive again.
Its IPO markets soared in 2017 – these are the key figures:
- 106 IPOs raise £15bn in London – three year high
- +63% by number of IPOs, +164% by value of IPOs year-on-year, surpassing all European exchanges
- 9 out of largest 10 by value are international; 20 listings come from North America
- money raised on AIM +97%, via IPOs, year-on-year
AIM vs NASDAQ
Smaller North American’s companies with a market capitalisation of less than $500 million considering a public listing are unlikely to get much attention from NASDAQ’s investors. They, among others, should consider AIM.
In recent years, the average market cap of AIM listed companies has been in the region of $100 million, so smaller companies get more research coverage and investors’ attention.
Smaller NA’s companies should also consider AIM for its lighter regulation, which allows them to raise money and carry out transactions without costly paperwork. By contrast, the regulatory demands of NASDAQ, is often too time consuming and costly for them.
Finally, they could see AIM as the bridge they need to access finance before listing on NASDAQ too, when they reach the right size.
This line of thinking applies to other regions with growing companies too. Technology ones especially.
AIM and Technology
Unlike a few years ago, AIM now lists many overseas companies and covers a broad range of sectors – including technology. Last year, Tech was one of the most successful sectors in raising finance on AIM. FreeAgent, a fintech company (cloud accounting for small businesses), has been AIM listed since November 2016. We know other fintech companies (fintechs) are considering it.
In our opinion, AIM represents a good option for certain fintechs, including potential unicorns (companies aiming to grow to valuations of $1 billion or more).
However, many investors in AIM listed companies (still) seem to prefer cash generation and profits to revenue growth. Fintechs and other techs (particularly those from overseas with rapid growth ambitions) considering an AIM listing should remember that.