Among the stock indices maintained by the FTSE Russell Company for the London Stock Exchange, the AIM All Share index has a special place. The AIM (Alternative Investment Market) segment is the London Stock Exchange’s market for small and growing companies coming both from within the United Kingdom as well as other parts of the world. AIM provides an ideal environment for these ambitious businesses to access capital and liquidity of the London system of markets, which is the largest and deepest pool of international capital in the world. The shares of AIM listed companies, however, belong to the ultra-high-risk class, but also come with the potential of very high rewards as well. AIM stocks, which at one point of time struck fear in the hearts of mainstream investors who believed that the market was full of small mining companies whose volatility wasn’t worth the ensuing anxiety, now boasts of companies which are worth billions and have given returns far exceeding their large cap counterparts donned by the FTSE 100 at the London Stock Exchange’s main market. Yet the market could still prove to be dangerous to the unsophisticated investor or even for more sophisticated investors who lack both the knowledge and resources to conduct proper inquiries into a firm's prospects and its activities or who may be lacking in strong internal control and risk management requirements. As a consequence, the market’s investor base is largely composed of institutional investors and high net worth individuals.
Below are ten things about the index that make it unique and are worth noting for investors and other market participants.
- The AIM market segment is unregulated – The London Stock Exchange does not impose upon the constituents of the AIM segment the same set of stringent disclosure and regulatory requirements as on the companies belonging to the main market segment. However, these companies are subject to the accounting and taxation related regulations and must abide by them in their respective home countries where they are domiciled, where they disclose their operating and financial position in their respective currencies of presentation.
- Most companies on the segment belong to the ultra-high-risk class – Most companies that find place on the AIM segment of the London Stock Exchange are of Ultra high-risk segment. Most of these companies are either start-ups or are have innovative business ides and are into novel business types which have nil or negligible market and also there is high risk that the products or services may not be able to garner the market share they seek to garner for themselves.
- Performers move to main market segment – One of the aspects of the companies of the AIM segment is that once they have developed their businesses and their revenues and cash flows have crossed a certain threshold, they are shifted to the main market segment of the London Stock Exchange. This, over a period of time, takes away all the stable performers of the index and keeps the overall risk profile of the index at a higher level.
- Since inception 3000 companies admitted to this market – Since 1995 from when the AIM (Alternative Investment Market) has been instituted, nearly 3000 companies have been admitted to it. They have been able to raise funds in total of around £60 billion. A lot of them have seen stupendous success since then and a lot of them have since closed down. However, the companies that have been able to hold on and have performed reasonably well, have brought great laurels to the segment and the indices based on it.
- Companies from around the world can seek admission – The segment is open for companies from all over the world to come and register and seek funding for their ventures and ideas. Companies from as far as South America and Middle East have come here and have tasted success. The market segment acts as nursery to nascent ideas and ventures across the world.
- The Index plays host to the greatest number of sectors – The AIM All Share index of the AIM market segment plays host to the maximum number of sectors compared to any other index of the London Stock Exchange. Currently, there are eighteen industry segments on the index namely , Construction and materials sector, Financial Services sector, Food & Beverages sector, Health Care sector, Industrial Goods and Services sector, Insurance sector, Media sector, Oil & Gas sector, Automobile Parts sector, the Banking sector, Basic Resources sector, Chemicals sector, Personal & Household Goods sector, Retail, Technology, Telecommunication, Travel & Leisure and the Utilities sectors.
- Nearly 500 companies on this segment have operations spread outside UK – Of the total number of companies on the AIM All share index, nearly 500 companies have their operations spread outside of the United Kingdom. This is the highest among all other indices maintained by the FTSE Russell company for the London Stock Exchange.
- Very less analyst coverage for most companies – Because the index hosts so many small companies both in terms of revenue and market capitalisation, the analyst coverage on these companies is also the lowest making it difficult to value these companies. This also adds significantly to the risk profile of the market segment and the indices maintained over it.
- AIM listed companies must prepare books as per IFRS – One of the requirements common for all AIM listed companies is that they have to prepare their books as per IFRS bookkeeping conventions so that it would aid in comparing amongst companies listed on the segment. However, companies have the option to publish their results in currency denominations of their convenience.
- The index has performed better than its cousins over the years – Though the market segment contains the riskiest companies listed on the London stock Exchange, the AIM All Share index has been the better performer among all the FTSE indices maintained for the London Stock Exchange. The market segment and the indices based on it still maintain their high-risk, high- return profile even after so many years.
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