Ensuring that the AIM remains true
In my last article I mentioned that the cost of failure on a company’s reputation can be considerable. I pointed out that according to our latest QCA/YouGov Small and Mid-Cap Sentiment survey, companies estimate that 32 per cent of their market value is accounted for by reputation.
I used this and data from the FTSE indices to show that the value of corporate reputation of the FTSE All-Share amounts to an amazing £736,742m and the
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Hide Advalue of corporate reputation of the AIM All-Share is £17,657m.
The figure for AIM is important as this represents the consequences of damage to individual growth companies across a market.
But what of the market itself, for the arena in which companies gather to raise finance in order to scale-up and grow? If this is broken then each company has another factor to take into account in addition to concerns about products and services.
Well the good news is, and London Stock Exchange statistics back this up, that the market is not broken. In fact investors in a recent survey said that it is the best it has ever been.
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Hide AdSo why are the London Stock Exchange seeking views on how to improve AIM when it’s working so well? It ain’t broke, so why fix it?
Well, it’s a good example of building on success. It takes a confident market to open itself up and ask questions of itself. The London Stock Exchange has published a wide-ranging consultation on the AIM Market.
It asks such questions as whether the discussions between the AIM team and Nominated Advisers could take place earlier in the IPO process to remove some of the questions that might crop up later. It asks about whether there should be a minimum amount of money raised when a company comes to market. It asks whether AIM companies should be required to report annually against a governance code.
The latter is an important issue for the Quoted Companies Alliance as we publish the most relevant and practical governance code for AIM companies.
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Hide AdThese questions - and more - probe the detailed issues to ensure the market continues to operate effectively. The market and the London Stock Exchange want to ensure that the UK continues to benefit from having the leading growth market in Europe over the next five to 10 years by being fit for purpose. It is essential that UK and international growth companies have the opportunity to raise finance in the easiest possible way whilst retaining the confidence of investors.
In addition to answering the questions - the consultation closes on September 8 - it’s well worth looking at the document because the introduction is a good exposition of how AIM has developed and it describes the roles of the London Stock Exchange and the Nominated Adviser. This is useful background reading for any investor.
The document also includes a paragraph that says, “London Stock Exchange has always been mindful to retain AIM’s distinct features, ensuring that AIM is a market accessible to small and medium sized growth companies and entrepreneurs, maintaining its clear points of differentiation from the Main Market.
"We remain convinced that maintaining a distinct growth market ensures that there is an efficient allocation of capital that supports the risk profile of companies at different stages of growth and maturity.”
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Hide AdThis is an important and essential statement that underlines the London Stock Exchange’s commitment to AIM, retaining and enhancing its attractiveness and identity.
And if they take care of their markets before they are broken; if they build on success rather than waiting for standards to drop off, then perhaps the glow of the market’s productive reputation will increase the market’s value by 32 per cent rather than fall. Markets can go up as well as down!