Does AIM Live Up to the Hype?
By Katerina Mitrou
London's Alternative Investment Market is getting a lot of attention lately, especially from small and growing businesses that see it as a potential alternative to the bigger markets. But why is AIM gaining in popularity among companies and investors alike? Is AIM a market you should consider - do the risks outweigh the benefits?
If you have done any research on AIM in the past you already know that it is growing quite rapidly. Last year it grew by 500 new companies; an increase compared to the 355 new companies that joined in 2003. Along with the growing number of companies flocking to AIM are eager investors, who are willing to take advantage of investment opportunities in smaller and newer companies rather than put their money into the big ones.
In particular, companies are eager to list on AIM for several reasons. In the first place, new companies see it as an opportunity to grow without all the restrictions and hindrances put in place by the main markets and many international exchanges. For example, if a company cannot provide the required trading record to float on the main market, the only alternative might be AIM. The Sarbanes-Oxley corporate governance rules in the U.S. are also a concern for many American companies that want to go public.
Softer regulations and lower costs make AIM an attractive market, especially for smaller companies that have no other way of raising the funds necessary to sustain continued growth. AIM makes it easier for these companies to take that next step. Overseas firms find AIM easier to break into than other markets as well.
Of course, if you list on AIM, many investors will be attracted to investing in your company because of the potential to rein in huge profits if your stock grows at a rapid rate. Private investors can get in at the beginning and benefit from the growth that may follow. Larger companies don't have the tendency to grow in leaps and bounds as their younger counterparts do.
But is this market too risky for some investors, and as such, not quite as enticing for companies as it might seem at first glance? This really depends on what your company's needs are and what you're looking to gain from the market. Although the UK is actively seeking to attract more companies from the U.S., there are worries among American companies that AIM might not be worth the risk.
In addition, more and more foreign companies (that follow different reporting and corporate governance standards) and lower-quality UK-based firms are joining AIM, and some analysts worry that overall, the shares are overpriced. And rumors are flying that IHT relief on AIM shares might be scrapped in the near future, which would cause investors to start a massive sell-off.
Of course, only time will tell whether or not the potential problems surrounding AIM are temporary or deep-seated. There are both risks and benefits to listing on AIM, so in the end, the decision your company makes rests on factors specific to your particular situation.
About the Author
This article was sponsored by http://www.firstamericanstock.com and written by Katerina Mitrou. First American Stock Transfer, Inc. is registered with the Securities & Exchange Commission as a Registrar and Transfer Agent. Reproductions of this article are encouraged but must include a link back to http://www.firstamericanstock.com.
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