AIM is the most successful growth market in the world.
The main reason companies list on the AIM is to raise money to fuel their growth.
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What is AIM ?
Quite simply, Aim is the world’s leading growth market.
AIM was created by the London Stock Exchange in 1995, one of their straplines is “Powering the companies of tomorrow”. It provides a regulated market for small but growing International companies, the main reason companies list on the AIM is to raise money to fuel their growth. Since its inception, there has been over £45bn raised from new listings and over £68bn raised from further fundraisings. An impressive combined total of over £113bn. There are currently over 900 companies listed with a combined market cap of over £100 Bn however since 1995 there have been over 3800 companies from all over the world that have listed on the AIM.
5 Top AIM Shares
The World's largest provider of arbitration and litigation finance
Burford Capital was founded in 2009 when its chief executive Christopher Bogart wielded funds raised from working as general counsel to Time Warner on its merger with AOL. The company was a pioneer in providing institutional-quality commercial litigation finance and aims to 'address the impact of unequal financial resources on litigation outcomes'.
The company’s income is derived from providing litigation finance as well as risk management and asset recovery services to its clients and law firms around the world.
Listed on AIM 21 October 2009
Listing Price 100p
Listing Market Capatalisation £80,000,000
Highest price since list 2075p (29 August 2018)
% Return of 1975%
The upmarket mixer maker
Fevertree Drinks, which produces premium mixers for alcoholic beverages, has been a soaring success since listing in 2014, having more than trebled in value since the middle of 2016.
The company has triumphed off the back of the booming market for premium spirits, starting with gin and gradually moving to dark rum and others.
Fevertree is the most popular mixer brand in the UK off-trade (supermarkets and stores) and it is still growing its position in on-trade (pubs and restaurants). It is also expanding in both the US and Europe.
Listed on AIM 7 November 2014
Listing Price 134p
Listing Market Capatalisation £154,000,000
Highest price since list 4242p (12 September 2018)
% Return of 3066%
Hutchinson China MediTech
The biopharma and pharma stock
Hutchinson China MediTech is a biopharmaceutical company pursuing treatments for oncology and immunological diseases. It currently generates revenue by manufacturing and distributing prescription drugs and other health products to consumers in China.
It is majority-owned by CK Hutchison Holdings Limited, a conglomerate with annual sales of over $500 billion.
Listed on AIM 19th May 2006
Listing Price 275p
Listing Market Capatalisation £140,000,000
Highest price since list 5940p* (4th January 2018) *Share split of 1 for 10, May 3 2019
% Return of 2060%
Fast fashion for millennials
ASOS has been one of the biggest beneficiaries of the transition to online shopping that has left bricks-and-mortar retailers struggling. The online fashion retailer has continued to deliver growth in its core UK market as well as expansionary geographies in the US and Europe, but it has seen a slowdown.
Listed on AIM 3rd May 2001
Listing Price 20p
Listing Market Capatalisation £12,323,952
Highest price since list 7776p* (15th March 2018)
% Return of 38,780%
A profitable biopharma business
Abcam plc is a global life sciences company. Abcam plc is both the UK operating company and the holding company for the group. There are a number of trading subsidiaries which are 100 percent owned by Abcam plc.
Abcam is a producer, distributor, and seller of high-quality protein research tools. These tools enable life scientists to analyse components of living cells at the molecular level which is essential in a wide range of fields including drug discovery, diagnostics and basic research. They are headquartered in Cambridge, UK with ten additional locations across Asia, the UK and the USA.
Listed on AIM 3rd November 2005
Listing Price 167p
Listing Market Capatalisation £57,500,000
Highest price since list 8950p* (15th September 2010) *Share split of 1 for 5, Nov 15 2010
% Return of 5259%
Benefits of trading AIM
The main reason AIM exists is to provide funding to fuel the growth of small international companies. This is one of the main benefits and exactly why so many investors are drawn to AIM. With success stories like ASOS, FEVER-TREE, Majestic Wines and Burford it is easy to see why. But the downside can be just as impressive, with many companies disappearing from the market due to scandals or failed business plans.
Stamp duty and stamp duty reserve tax
AIM shares are exempt from stamp duty, thus saving the 0.5% tax, which would be due on the main listing of the London Stock Exchange.
The Government were looking to aid the growth of small and medium enterprises and in 2014 the Finance Bill was introduced to abolish stamp duty and stamp duty reserve tax (SDRT) on transfers of unlisted securities traded on a recognised growth market’.
Inheritance tax (IHT)
Business Relief (BR)
Business Relief (BR) provides relief from Inheritance Tax (IHT) on the transfer of relevant business assets at a rate of 50% or 100%. Therefore achieving exemption from inheritance tax for a sizeable majority of shares on AIM.
This is because they are counted as being unquoted and under the Business Relief (BR) rules, shares in unquoted businesses are exempt from inheritance tax (IHT).
The holdings qualify as long as they are held in the estate for two years at the time of death.
Capital gains tax (CGT) gift relief
The CGT liability can be postponed until the receiver sells the stock.
Tax is a very complex subject and tax treatment is dependent on each of the individual’s personal circumstances and may be subject to change in the future. We would always suggest seeking professional advice before making any investment decision.
A guide to AIM tax benefits has been put together by the London Stock Exchange Group and RSM. Click to review
AIM Trading tips
The best place to start before trading AIM is to look at the risks. We have included our AIM risk warning below:
Shares in smaller companies or AIM listed shares can carry a higher degree of risk than blue-chip investments and there is always the possibility of losing the capital sum invested.
Investment should be restricted to the maximum one can afford to lose.
It is more difficult to buy and sell shares in small companies and it may not always be possible to deal.
Market Makers operate with a wide spread between buying and selling prices for small companies and this spread and fluctuation in the share price may mean that you do not get back the full amount invested.
AIM is primarily for emerging or smaller companies and its rules are less demanding than those of the Official List of the London Stock Exchange.
The past is not necessarily a guide to future performance by companies that are less financially secure and therefore the risk of default is substantially higher.
Shares in companies incorporated in emerging markets may be harder to buy and sell than those shares in companies in more developed markets. In addition, companies incorporated in emerging markets may not be subject to an equivalent level of regulation as those in more developed jurisdictions.
Investing in shares in a specialist sector can be a higher risk strategy as the sector concentration gives exposure to higher volatility.
Now let's look at some of the points to see their potential impact and other factors to consider.
AIM is only for small companies.
Small companies are more vulnerable and are less well capitalised than main listed shares. But are all AIM Shares small companies?
The top 10 companies have a combined market cap of over 22 billion however the bottom 10 have a combined market cap of just over 3.85 Million.
Impact of wider spreads
If you first look at the spread of one of the largest and most actively traded on the FTSE and then compare with the smallest company on AIM.
Certain shares can be "illiquid" meaning that you can't be sure that you can buy and sell when you want
With growth companies you are going to get it wrong, trade for long enough and you will get a share that goes bust or features in a scandal. The best way to balance this out is with diversification. If you buy ten AIM shares, one goes bust one goes up 300% and the remaining eight balance each other out your portfolio is still up 10%.
Small volumes of business can have a disproportionate effect on price and lead to greater volatility. Also if a small company is spending all its money trying to find a valuable asset say oil or gas and finds nothing it is going to have a big impact when it announces to the market it has come up dry!
AIM regulation is less onerous than the main market. While greater regulatory flexibility makes it easier for smaller companies to list and makes it more cost-effective, it also leads to significantly increased investment risks.
An inefficient market is simply a market in which share prices do not accurately reflect their true value. Within the AIM it could be caused by minimum trading history, under-researched companies due to lack of coverage by analysists or lack of news flow.
All you have to do now, is research the AIM companies to see if they are under or overvalued and then trade the right way.
How to trade AIM
Buying shares in AIM companies, investors can own a tiny fraction of the business.
Due to the smaller size of most AIM companies, your risk and reward are amplified and the share prices can react accordingly.
When the business grows you can take advantage of any rise in the share price, however, the chances of the business failing are just as likely thus causing the price to fall or even drop to zero.
AIM CFDs and
CFDs and Spreadbetting are used to achieve leverage.
Rather than pay the full value of a transaction, investors only need to pay a percentage of the whole trade value when opening the position.
What this means to investors is that they have to generally commit circa 25% (£2,500) margin to purchase £10,000 worth of shares. This is referred to as the ‘Initial Margin’.
The key point is that the margin allows leverage, so that investors can access a larger amount of shares than they would be able to if buying or selling the shares themselves, and allowing the opportunity to amplify returns either positively or negatively.