On June 19, AIM – the Alternative Investment Market as it once was – turns 25, still with the reputation of a teenaged tearaway.
The market superseded the Unlisted Securities Market and like that oxymoronically named market, its purpose was to provide a stock market listing for companies that did not have the track record necessary or the inclination (or the cash) to go for a full-market listing.
From small AIMcorns unicorns grow
When AIM launched it had just 10 companies listed on it; none are around anymore although some companies that were around in 1995 have voluntarily moved to the market to take advantage of its lower listing costs and lighter regulatory touch.
The combined market capitalisation of the original 10 companies was £82mln whereas now, the average market capitalisation of the 852 companies listed on AIM is just over £120mln.
Indeed, 20 of AIM’s companies are billion pound-plus companies, with fashion firm Boohoo Group PLC (LON:BOO) at the top of the greasy pole with a market capitalisation of £4.8bn, having recently toppled another online schmutter flogger, ASOS PLC (LON:ASC), which is worth a “mere” £3.3bn.
Boohoo would sashay into the FTSE 100 were it eligible, with a market capitalisation that is around £400mln higher than Sainsbury’s while ASOS would have a fighting chance of sneaking in, as its market capitalisation is higher than six current index constituents, namely Whitbread, ITV, easyJet, Meggitt, Centrica and Carnival.
The combined market capitalisation of the 852 companies tops £100bn so it is fair to say that the market has come a long way.
One former AIM luminary, Melrose Industries PLC (LON:MRO) has already made it into the FTSE 100, although of course, it had to leave AIM to do so. Melrose listed on AIM in 2003 with a market capitalisation of £13mln; it is now worth £6.9bn and owns aerospace and automotive engineer, GKN – a company so venerable it was an original member of the FT 30-share index (the forerunner to the FTSE 100).
Another large company that was once on AIM is Domino’s Pizza Group PLC (LON:DOM), which with a market cap of £1.6bn is a stalwart of the FTSE 250. At various times other former AIM companies have made it into the FTSE 250, such as cash-and-carry giant Booker, which is now part of Tesco, and storage company, Big Yellow Group PLC (LON:BYG).
Not such a rarity – the dividend-paying AIM stock
If the treble-figure average market capitalisation of AIM companies is a sign of how far the market has come, so is the fact that 258 (30%) of the 852 AIM companies pay dividends – although that number may change (at least temporarily) with the current trend of companies suspending dividend payments as a result of the coronavirus pandemic.
Over half of the companies – 451 to be precise – made a profit last year if you go by earnings before interest, tax, depreciation and amortisation (EBITDA), although that figure declines to 363 if you prefer reported profit before tax.
All of which gives the lie to the oft-repeated jibe that AIM is a market for companies that don’t make a profit (and probably never will). Although it is still the natural place for high-growth young companies to list, the fact that on average companies on the junior market have been on it for around 13 years underlines the fact that the market has changed into something a bit less like the Wild West.
Which is not to say that there have not been some horror stories emanating from AIM but those, along with a tour of some of the success stories, are tales for another time.