The Alternative Investments Market (AIM) of the London Stock Exchange (LSE) has had a difficult time in recent years. The market was established in 1995 for smaller, high-growth companies to access capital, and at its height in 2007, there were 1,694 AIM-listed companies. As of the 30 September 2024, however, this number has dropped to 695 companies.

Several factors may be contributing to AIM’s decline. Broadly speaking, public markets have seen a shift towards less-risky, larger company stocks in response to economic and political uncertainty over the last two years. In the UK, speculation over possible tax changes on AIM shares has further hindered this market. Additionally, the recent AI boom in the US has also drawn attention away from London’s small-cap companies.

In the 12 months to August 31, only £1.18 billion was raised on AIM, a far cry from the £6 billion peak of 2021. The reduced liquidity for small-cap, London-listed companies, as well as the cost of listing, has discouraged IPO candidates from choosing AIM. While 76 companies delisted from AIM last year – a 62% increase from the previous year – only 8 new companies have been admitted in 2024 (up to September 30).* Companies leaving AIM, either via acquisition or delisting, are not being replaced by new listings.

These issues have created a feedback loop, whereby high-growth companies seek IPOs on other markets and AIM therefore receives less interest from investors. We at Aalto Capital recently experienced this first-hand; one of our clients opted to list in Stockholm rather than on AIM due to concerns over cost and liquidity.

Recent LSE reforms appear targeted at attracting companies back to AIM; however, whether these incentives generate enough momentum to overcome the AIM’s stagnation remains to be seen.

* Source: Tony Blair Institute for Global Change.