AIM shows its mettle

Wednesday, April 21, 2010 | Posted by: Grant Thornton
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Looking ahead to AIM’s fifteenth birthday this June, it is clear that the market has come a long way from its launch in 1995 when it had ten small UK companies worth a total of £80 million. Today, AIM is firmly established as the world’s pre-eminent stock market for young growing companies, having helped over 3100 companies raise in excess of £66 billion.

It is worth remembering that AIM was not the only European growth company market founded in the mid 1990s.Neuer Markt, in Frankfurt; Nouveau Marche in Paris; and EASDAQ in Brussels were just three of a number of markets that were founded by our competitor exchanges in that period. However, all had very different regulatory models, and none developed AIM’s broad sectoral spread of companies; instead focussing much more heavily on technology and dot-com companies. It was only AIM though that survived the Dot-Com stock market crash of 2000-2001, and over the ensuing 3-4 years, all of these other markets either imploded or were closed by their parent exchanges.

Today, as the UK economy recovers there is a renewed focus on nurturing SMEs to innovate and contribute to growth. Debt finance remains unavailable to many innovative companies, so dynamic public markets like AIM, where companies can access equity finance on an ongoing basis, will continue to support and drive entrepreneurial activity. An investment in AIM is an investment in the global economy and spurring the creation of jobs on a global scale. With over 1300 companies listed today the market is crucial to the financing chain of SMEs with international ambitions from all over the world. India continues to lead the way in producing some of the most successful SMEs in the world.

Against the encouraging economic backdrop, Indian stocks on AIM substantially outperformed the market and AIM in 2009. Grant Thornton’s India Watch soared by 212% in 2009, outperforming both the FTSE 100 (22 %) and the AIM All-Share Index (66%), reflecting heightened investor interest in Indian stocks.  In particular companies like KSK Power Venture (graduated to Main Market on 31 March 2010), Great Eastern Energy, Indus Gas and Ishaan have all experienced triple-digit growth in share prices over the last 12 months.

At the end of last year the 22 Indian stocks quoted on AIM represented 9% of the total value of the market. In 2008 18% of all the new money raised on AIM was raised by Indian companies, the largest by a single country other than the UK - and since 2005 and the first listing by an Indian company Indian businesses have raised an impressive $3.9 billion through IPOs.

The Exchange is not standing still in helping companies make the most of their AIM quotation. We’ve undertaken an extensive programme of regional and international road shows for investors and issuers including a very successful collaboration in India with Grant Thronton where we visited three cities in the first week of March 2010. We have also run a number of sector specific capital markets days bringing to together international companies and investors at the Exchange itself. Continuing to work closely with market participants to develop greater liquidity in AIM and Main Market securities remains another key priority, and we remain committed to providing the companies on our markets with the tools they need to communicate with investors.

We have recently published our Practical Guide to Investor Relations which offers advice to companies about investor relations, collates a wealth of expertise from a series of corporate advisers, quoted companies and investors. In a difficult economic climate it is more essential than ever that companies establish an effective dialogue with their shareholders. As this is central to enhancing liquidity, we will also be arranging a series of roundtable meetings for companies around the UK to discuss the most effective ways to implement an effective investor relations strategy.

At a European level, we are engaging with other market operators and policy makers to discuss and identify solutions to alleviate the challenges SMEs face in accessing finance, and are optimistic that the ongoing Prospectus Directive Review will include amendments to the benefit of smaller companies.

Since its launch, AIM’s success has helped position London as the world’s leading international financial centre. And today the market’s core mission remains what it has been from the start: to provide a market for small and medium-sized companies from both home and abroad with the capital they need for expansion. I strongly believe that AIM has the credentials and momentum to continue in its role as the world’s growth market and look forward to welcoming the next crop of ambitious, innovative Indian companies to AIM over the coming months and years as AIM provides the capital to help power economic recovery.

 

Ibukun Adebayo

Head of Primary Markets, India
London Stock Exchange