Ensuring that the AIM remains true

Tim Ward, Chief Executive, Quoted Companies AllianceTim Ward, Chief Executive, Quoted Companies Alliance
Tim Ward, Chief Executive, Quoted Companies Alliance
They always say that 'if it ain't broke don't fix it'. But if you find out that your'‹ '‹product or service is broken at the same time as your customers then you'‹ '‹may well suffer from some reputational damage to your company.

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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value 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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So 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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These 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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This 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!

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