Definition
The Alternative Investment Market (AIM) is a sub-market of the London Stock Exchange, created in 1995, that allows smaller, less-vetted companies to float shares with a less strict regulatory regime than is applicable to the main market. It’s essentially a platform for smaller, emerging, or high-growth companies to raise capital. With a more flexible regulatory system, it attracts many startups and venture capitalists.
Key Takeaways
- The Alternative Investment Market (AIM) is a sub-market of the London Stock Exchange, designed to help smaller, less-voted companies access capital from the public market. It offers a more flexible regulatory system than is applicable to the main market.
- AIM is targeted at high-growth, entrepreneurial businesses as it allows them to raise necessary funds for expansion. These businesses are typically from the tech, industrial, and consumer sectors.
- The risk associated with investing in the AIM is comparatively higher due to its less stringent rules and regulations. It’s usually recommended for experienced investors who have a higher risk tolerance.
Importance
The Alternative Investment Market (AIM) is important because it provides small and medium-sized companies a platform to raise capital while offering less stringent regulatory oversight compared to traditional markets, like the London Stock Exchange.
AIM, with its more flexible regulatory system, is specifically tailored to assist these smaller, growth-driven businesses that may not meet the criteria for larger exchanges.
This gives an opportunity for investors to buy shares in potential high-growth companies which are traditionally risky yet potentially highly rewarding.
Consequently, investor participation in AIM can foster business innovation and economic growth.
Explanation
The Alternative Investment Market (AIM) serves a significant purpose as a sub-market of the London Stock Exchange. It is designed specifically to aid smaller, more dynamic businesses that wish to expand or are at their nascent stage – many of them in high growth or high tech sectors.
The platform offers these enterprises an opportunity to access public funds, elevate their profile, and foster growth without having to comply with the more stringent regulations that apply to the main market. The AIM’s purpose is dual: aiding investors and assisting businesses.
For investors, it provides a chance to invest in promising or innovative businesses early-on, often leading to high returns if the business succeeds. For businesses, it serves as an ideal platform to attract capital for expansion or debt reduction, employing a more simplified and flexible regulatory system.
This unique arrangement gives companies the chance to raise financial capital and attain a market listing while maintaining control of their business, thereby bolstering their growth.
Examples of Alternative Investment Market
The Alternative Investment Market (AIM) is a specialized subsidiary of the London Stock Exchange, designed especially for smaller, emerging companies. Here are three real-world examples of companies that have been listed on AIM:
ASOS: ASOS is an online fashion and cosmetic retailer based in the UK. The company was initially listed on the AIM in October 2001 and has since grown significantly, becoming one of AIM’s most successful stories.
Boohoo: Another successful online fashion retailer, Boohoo.com, is also listed on the AIM. Since their initial listing in 2014, they have expanded their business rapidly with significant price appreciation for their shares.
Fevertree Drinks: This UK-based beverage producer was listed on AIM in 2014 and has seen a significant rise in their share price and market capitalization over the years, demonstrating the growth and success a company can achieve when it is listed on the AIM.
FAQs: Alternative Investment Market
What is the Alternative Investment Market?
The Alternative Investment Market (AIM) is a sub-market of the London Stock Exchange. It was launched in 1995 to help smaller, less-viable companies access capital from the public.
Who can invest in the Alternative Investment Market?
Any investor, whether an individual or an institutional investor, can invest in companies listed on the AIM. However, it’s important to note that investments in AIM-listed companies may come with higher risk due to their smaller size and limited operating history.
What are the benefits of investing in the Alternative Investment Market?
Investing in AIM offers potential for high returns, especially if the investee company does well. It also offers diversification from traditional equities. Additionally, shares in certain AIM companies are exempt from Inheritance Tax (IHT) under the Business Property Relief (BPR) rules.
What are the risks associated with investing in the Alternative Investment Market?
Investing in AIM-listed companies can be risky. These companies are often in their growth phase, meaning they might not be profitable yet. Their shares could also be illiquid, making them hard to sell. Moreover, the lack of regulatory oversight could mean higher risk of corporate governance issues.
How can I invest in the Alternative Investment Market?
To invest in the AIM, you can purchase shares of an AIM-listed company through a broker who has access to the London Stock Exchange, or you can invest indirectly via a fund that tracks the AIM.
Related Entrepreneurship Terms
- Initial Public Offering (IPO)
- Liquidity
- Private Equity
- Hedge Funds
- Company Valuation
Sources for More Information
- London Stock Exchange: As the operator of the Alternative Investment Market (AIM), the London Stock Exchange website provides comprehensive information about the market, its operation, and listed companies.
- Investopedia: Investopedia is a trusted online resource for financial and investment terms. It offers substantial content on the Alternative Investment Market.
- Citywire: Citywire is a UK-based financial news service that often provides sector-specific news, including coverage of the Alternative Investment Market.
- Financial Times: The Financial Times offers global business news, analysis, and information, including reports on the Alternative Investment Market.
