Author: Ben Weaver

For smaller UK companies looking to tap public markets, the obvious funding choice is listing on AIM, the London Stock Exchange’s (LSE) sub-market for smaller businesses.

Since launching in 1995, companies on the index have raised more than £115 billion in growth capital. But its heyday has passed. The Independent has called AIM a “zombie market not fit for purpose”, pointing out that of the companies listed on AIM for over ten years, nearly two-thirds are loss-making.

Today, there are hundreds of businesses currently listed on the index that aren't a good fit. This typically comes down to three areas: a lack of appetite amongst investors for listed small cap companies, a lack of liquidity, and the high costs attached to being a public company.

At Asset Match, we can help companies find that liquidity and for a fraction of the cost.

The AIM liquidity trap

Put bluntly, there are some companies on AIM that barely anyone is trading. For example, in January, the average value traded among the least liquid 5% of AIM stocks was just £4,145.

One reason many AIM stocks are illiquid is because the exchange observes regular trading hours, which means investors can buy and sell shares from 8am to 4.30pm every weekday. At Asset Match, we don’t think all companies need to trade every day. Instead, we run auctions every three months, gathering all of the demand in a small time window and creating an intermittent but much more liquid trading experience. In total, we have traded £123 million across 802 auctions.

As a result, companies on Asset Match trade on average £300,000 of their stock each year. More than 12% of companies on the LSE (83 on AIM and 165 on the main market) trade below this liquidity level. The average value traded for these companies is just £80,000.

You may hear that AIM liquidity has been improving since the market was founded. This is true. The problem for most companies is that the distribution of liquidity has not. The majority is focused on a small number of the largest businesses, while the larger number of smaller companies trade less frequently.

It’s not cheap being a public company

Companies trading on the AIM are paying a lot for the privilege. An initial IPO on AIM will likely cost a minimum of £500,000. Core running costs are typically at least £200,000 a year once you factor in RNS announcements and legal costs, as well as nominated advisor (NOMAD), broker, and exchange fees.

For a company valued at £1 million, that’s a high annual cost to bear just to see £100,000 of your stock trade each year. In fact, there are about 400 companies listed on AIM with a market cap below £50 million which probably shouldn't be on there.

Asset Match doesn’t come with all these extra fees attached, while the bespoke listing fee is always significantly lower than listing on AIM, and often with much higher liquidity.

The companies joining Asset Match

It’s understandable that some companies are reluctant to delist. There’s a level of perceived status that comes with being a public company. Delisting can also feel like a step backwards: a spell on junior markets is often seen as a training ground ahead of moving to the main exchange. But many companies have enjoyed a liquidity boost and made cost savings from coming off AIM and joining Asset Match.

In 2012, Tottenham Hotspur delisted from AIM. The club’s chairman had previously said that trading on the exchange had restricted its ability to secure the funding it needed to develop its stadium. At the time of the delisting, shares were worth about 40p. Asset Match started trading Tottenham shares in 2015. Since then, the price has risen more than fivefold to £2.12.

Greenshields Agri Holdings never got as far as going public. For the agricultural group, the cost of listing on AIM was too high to justify. Instead, it asked Asset Match to operate a share buyback scheme at a discount to its net asset value. So far, we’ve helped the company buy about 1.7 million shares from investors at a value of £2.1 million.

Alternatively, some companies choose to use Asset Match as a way to boost liquidity and drive value in the run-up to an IPO. IntegraFin, for example, traded on the platform three years before it IPO’d as a FTSE 250 company in 2018.

It’s been a long time since the late 2000s, when all the bulge bracket investment banks had AIM trading desks. The advent of platforms such as Asset Match in the intervening years has created more options for companies looking to unlock liquidity. Our model has helped hundreds of them find buyers and sellers for their shares, which has undoubtedly been a good thing for both companies and their investors.

If you’re interested in creating a marketplace for your organisation on Asset Match, please contact us.