AIM needs more newcomers

Where are all the high growth companies?

A recent update from our associates Investor’s Champion highlighted how February 2019 was yet another poor month for new arrivals on AIM, with only 1 proper new arrival and 7 more departures. AIM certainly needs to be re-energised!

While the quality of companies on AIM has improved considerably over the 15 years we have been investing in AIM for Inheritance Tax planning purposes, we are becoming concerned by the shortage of suitably attractive new arrivals.

AIM’s reduced appeal to many high growth businesses is countered by its evident attraction to the legal and professional services sector. Of the 7 new arrivals in December 2018, which was AIM’s best month for IPOs in a long time, one of the newcomers (finnCap Group) was a corporate broker and two (Manolete Partners and Litigation Capital Management) were providers of litigation funding solutions. While profitable businesses, they are unlikely to set investor’s pulses racing in the same way a fast growing technology company might, although we quite like the look of Manolete! The litigation funders join several legal services groups already enjoying life on AIM.

Investor’s Champion pointed out that, as AIM has struggled, its rival Nasdaq First North, which encompasses junior markets across the Nordic region, has started to attract a growing number of small technology companies. Many companies on First North also carry similar attractions for Inheritance Tax planning purposes to those on AIM. First North welcomed 2 newcomers in February, one a video game development studio, the other a cloud-based software group, just the sort of innovative high growth businesses needed on AIM. Should the flow of attractive newcomers to First North continue, it could become a viable market for those with an eye on mitigating potential inheritance tax.

AIM may soon have another rival to contend with in the rejuvenated Nex Exchange, where Oliver Hemsley, the founder of UK stockbroker Numis Securities, is looking to take control and inject new capital into Nex, which will also be given a new name. Nex could find some willing supporters in those investing for Inheritance Tax planning purposes.

Thankfully there remains a large pool of attractive AIM companies in which to invest, it would simply be nice for this pool to grow, rather than shrink, as has been the case for the past few months.